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Author: 


Woods,  Clinton 


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Woods,  Clinton  Edgar. 

Unified  accounting  methods  for  industrials,  by  Clinton 
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LIBRARY 


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Unified  Accounting 
Methods  for  Industrials 


BY 


CLINTON  E.  WOODS 

Industrial    Engineer;     Author    of    ''Woods'    Reports,*' 
••Practical  Cost  Accounting,"  "Organizing  a  Factory,*'  etc. 


(Third  Printing) 


NEW  YORK 

THE    RONALD   PRESS   COMPANY 

X919 


w 
^ 


Co 


Copyright,  1917,  by 
The  Ron/»ld  Press  Company 


Orb. 


William  Q.  Hewitt  PreM.  Brooklyn.  PrinterE 
.1    i.  Tapley  Co.,  New  York.  Binders 


Dedicated 

to 

My  Fellow-Workers 

as  an 

Instrument  to  Help  Them 

Establish  the  Profession  of 

Industrial  Engineering 


PREFACE 


Somewhere,  somehow,  sometime,  in  the  universal  make- 
up of  things,  a  relationship  will  be  found  to  exist  between 
all  things  that  function  toward  a  common  end.  Activities 
using  the  same  elements  must  in  some  way  be  dominated 
by  a  common  principle.  If  this  can  be  discovered  it  will 
serve  as  a  clue  to  guide  the  investigator  to  his  goal  or  enable 
him  to  return  to  the  beginning  of  things  for  a  fresh  start 
if  analytical  ramifications  have  led  him  too  far  afield.  It  is 
with  this  thought  firmly  fixed  in  his  mind  that  the  waiter 
has  undertaken  this  work.  Its  subject  matter  is  not  new, 
but  it  is  treated  in  a  new  way  to  reveal  more  clearly  this 
condition  of  relationship. 

The  scope  of  this  work  is  limited  to  industrial  or  manu- 
facturing activities,  although  the  principles  herein  set  forth 
are  susceptible  of  a  much  broader  application.  It  should 
be  borne  in  mind  that  this  is  a  day  not  only  of  specialists,  but 
also  of  specialities,  and  that  the  cunning  of  the  inventor's 
mind  has  lost  no  opportunity  to  lighten  the  burden,  lessen 
the  cost,  and  make  more  accurate  the  work  of  the  ofifice  as 
well  as  that  of  the  factory.  Any  method  of  accounting 
proposed  at  this  time  must  therefore  take  full  cognizance  of 
this  fact  if  it  is  to  be  commensurate  with  modern  progress. 

The  reader  should  recognize  the  fact  that  it  is  not  to  be 
supposed  that  any  and  all  industries  offer  the  same  oppor- 
tunities for  improvement  as  those  cited  in  Chapter  I  of 
this  work,  as  in  nearly  all  instances  the  examples  used  are 
those  where  exceptional  opportunity  existed  and  was  taken 
advantage  of,  thereby  becoming  of  educational  value  as  a 


^j  PREFACE 

foundation   for  research  work  on  the  part  of  industrial 
executives  who  care  to  study  them. 

It  is  to  be  noted  that  the  forms  presented,  while  selected 
from  those  in  actual  use,  are  for  illustrative  purposes,  and 
there  is  no  hard  and  fast  rule  preventing  their  modification 
or  change  either  in  captions,  size,  or  general  arrangement 
to  meet  any  special  requirements. 

It  has  been  deemed  best  to  present  the  balance  sheet  in 
the  first  part  of  the  book.  This  means  the  giving  first  of  that 
which  would  ordinarily  be  given  last ;  but  it  is  sometimes 
well  to  picture  a  house  before  building  it,  and  this  would 
seem  to  be  one  of  those  times. 

The  author  realizes  the  impossibility  of  writing  a  book 
of  this  character  without  leaving  many  questions  un- 
answered, and  that  it  must  necessarily  be  somewhat  specific 
in  its  subject  matter.  It  has,  however,  been  written  for  the 
benefit  of  three  classes  of  individuals,  the  executive,  the 
engineer,  and  the  accountant ;  but  in  the  main,  the  present 
work  is  one  of  accounting  and  as  such  is  submitted  to  his 
fellow-workers  in  the  industrial  world  with  but  one  thought 
and  one  wish,  and  that  is,  that  they  may  derive  as  much 
profit  from  the  application  of  its  principles  and  precepts  as 
the  author  has  had  pleasure  in  formulating  them. 

In  conclusion  the  author  wishes  to  express  his  high 
appreciation  of  the  efficient  editorial  assistance  given  by 
Dr.  Carroll  W.  Doten,  of  the  Massachusetts  Institute  of 
Technology,  and  by  the  editorial  staff  of  The  Ronald  Press 
Company— assistance  which  has  added  much  to  the  clear- 
ness and  general  value  of  the  book. 


Clinton  E.  Woods 


Bridgeport,  Conn., 
January  2,  1917. 


CONTENTS 


Chapter  ^^^^ 

I     The  Development,  Elements,  and  Results 
OF  Industrial  or  Efficiency  Engineer- 

I 


ING 

A  New  Profession 

Conditions  Which  Make  Industrial  Engineering  Neces- 
sary 
Phases  of  Industrial  Engineering 
Principles  of  Industrial  Engineering 
Distribution  of  Expense 
Unified  Accounting 
Unified  Output 

Function  of  a  Sales  Department 
Results  of  a  Unified  Output 
Stabilizing  Production 
Standardizing  Output 
Weil-Balanced  Equipment 
Standardization  of  Labor 
Adjustment  of  Labor  and  Equipment 
Results  of  Scientific  Management 
Broader  Applications  of  Scientific  Management 

II    Analyzing     an     Industrial     Manager's 

Monthly  Balance  Sheet         ...     25 

The  Work  of  a  Manager 

Purposes  of  Unified  Methods  of  Accounting 

The  Monthly  Balance  Sheet 

Analyzing  the  Balance  Sheet— From  the  Standpoint  of 

the  Financier 
Analyzing  the  Balance  Sheet— From  the  Standpoint  of 

the  Executive 
Analyzing  the  Balance  Sheet— From  the  Standpoint  of 

the  Manufacturer 
Availability  and  Value  of  Unified  Balance  Sheet 
Manager's  Daily  Report 

Vll 


^m?Mf 


{ 


Vlll 


CONTENTS 


Chapter 

III    Purchasing  and  Receiving   . 

Work  of  the  Purchasing  Department 

Purchase  Specifications 

Purchase  Requisition 

Purchase  Order 

Material  Receipt  and  Notice 

FiHng  Purchase  Requisitions 

Filing  Purchase  Orders 

Filing  Material  Receipt  and  Notice 

Special  Instructions  for  Handhng  Invoices 


IV    General  Stores 

Orders 
Qassification  of  Orders 

(A)  Contract  or  Sales  Orders 

(B)  Manufacturing  Orders 

(C)  Production  Orders 

(D)  Prorating  Orders 

(E)  Betterment  Orders 

(F)  Repair  Orders 

(G)  Stores  Orders 

Stores-Keeping 
Stores 

Requirements  as  to  Stores 
Routine  of  Stores-Keeping 
General  Stores  Keeper 
Stores  Recorder 

Bureau  of  Censorship  of  Materials 
Control  of  General  Stores 
General  Stores  Record 
Classification  of  General  Stores 

1.  Office  Materials — Classification 

2.  Factory  Materials — Classification 
Classification  of  General  Stores — For  Stores-Indexing 

The  Issuing  of  Material  from  Stores 

General  Stores  Requisitions 
Stores  Credit  Memorandum 


Page 
41 


1 


57 


CONTENTS  ix 

Chapter  Page 

V    Component  and  Finished  Stores        .       .     9^ 

Nature  of  Component  and  Finished  Stores 

Component  Stores 

Component  Stores  Record 

Controlling  Account  for  Component  Stores 

Finished  Stores  Record 

VI     Stores — Special  Features   ....   101 

Assembly  Requisition 

Production  Order  Distribution  of  Material 

Assembly  Production  Order  Material  Distribution 

Extensions 

Daily  Report  of  Stores  Balance 

Objects  of  Stores-Keeping 

Stores  Keeper's  Order 

Goods  Returned  Memorandum 

Accounting  for  Goods  Returned 

VII    Preparation  for  the  Handling  of  Produc- 
tion         113 

General  Considerations 

Analysis  of  Production  Handling 

Utilizing  Plant  Capacity 

Production  and  the  Sales  Department 

Schedule  of  Production 

System  of  Numbering 

Piece  Key  Card 

Part  Key  Card 

Unit  Key  Card 

Preparation  and  Care  of  Cards 

Uses  to  Which  Key  Cards  Are  Applied 

Drawing  and  Tracing  Card 

Pattern  Record  Card 

Pattern  Location  Card 

VIII    Analyzing  and  Grouping  Machine  Tool 

Equipment 133 

Machine  Study  Card 

Tool  and  Fixture  Key  Cards 


X 

Chapter 


CONTENTS 


Tool  Key  Card 
Tool  Set-up  Key  Card 
Fixture  and  Die  Key  Card 
Operation  Studies 
Operation  Study  Card 
Making  the  Operation  Study 
Motion  Study  Card 
Operation  Key  Card 
Rate  Memo 


Page 


IX     Schedules         .       .       .       .       . 

Purpose  and  Scope  of  Schedules 
Manufacturing  Order — Master  Schedule 
Production  Schedule 
Purchase  Order  Schedule 
Scheduling  Labor 

Scheduling  Financial  Requirements 
Importance  of  Schedules 
Graphic  Charts 


.    149 


X    Converting  Labor,  Material,  and  Expense 

INTO  Finished  Product      ....   165 

Classification  of  Orders 

Production  Orders 

Tracing  Tag 

Issuing  Material  Requisitions 

Production  Tickets  and  Daily  Time  Slips 

Daily  Defective  Repairs  Time  Ticket 

Daily  Waiting  Time  Ticket 

Prorating  Orders 

Daily  Prorating  Order  Time  Ticket 

Daily  Non-productive  Labor  Ticket 

Plant  Betterments  and  Repairs 

Betterment  Orders 

Daily  Betterment  Time  Ticket 

Plant  Repairs 

Small  Repairs 

Daily  Repair  Time  Ticket 

Importance  of  Accuracy  and  Promptness 

Cost  of  Production 


CONTENTS 


Chapter 


XI 

Page 


Supplementary  Tag 
Rejected  for  Scrap  Tag 
Rejected  for  Defective  Repairs  Tag 
Symbolical  Control  Chart 
Planning  Board 

XI    Employment  and  Handling  of  Labor       .   197 

Organization  of  Employment  Department 

Application  for  Employment  Card 

Letter  Application  for  Employment 

Reference  Inquiry  Letter 

Requisition  for  Help  Card 

Employee's  Rate  Card 

Quitting  Card 

Employees  Dismissed  and  Resigned 

Pay  Period 

Time  Card 

Pay  Check 

Time  Sheet  (First  Form) 

Distribution  of  Labor  Costs 

Time  Sheet  (Second  Form) 

Time  Card  (Second  Form) 


XII    Distributions  ...... 

Organization 

Organization  diart 

Factory  Overhead  Sheet  for  Distributions 

Labor 

Materials 

Expense 

Redistribution 

Record  of  Production,  Betterment,  and  Repair  Orders 

Production  Cost  Card 

Sales  Analysis  Sheet 

XIII    Commercial  or  Office  Accounting  . 

The  Function  of  Commercial  Accounting 
General  Stores  under  the  Voucher  System 
Purchase  Voucher 
Charge  Vouchers 
Voucher  Record 


219 


241 


Xll 


CONTENTS 


CONTENTS 


Chapter 


Page 


XIV 


XV 


XVI 


Incoming  Cash  Sheet 

Check  Record 

Petty  Cash  Record  and  Voucher 

Journal  Register 

Journal  Voucher 

General  Ledger 

Commercial  Expense  Distribution  Sheet 

General  Commercial  Expense 

Selling  Expense 

Commercial  or  Office  Expense  Credits 

Analysis  of  Overhead 

Accounts  Payable— Personal 

Controlling    Accounts — Nature  ;    Asset 
Accounts 265 

Purpose  of  Controlling  Accounts 
Chart  of  Controlling  Accounts 
Classification  of  Asset  Accounts 
Classification  of  Liability  Accounts 
Classification  of  Profit  and  Loss  Accounts 
Assets — A.  Account 
Assets — B.  Inventory 
Assets— C  Investments 


I 


Chapter 


xiu 


Page 


XVII 


Inventory  Tag 
Disposition  of  Tags 
Equipment  Record 

The  Work  of  the  Systematizer 

Relation  between  Standardized  Accounting  and 

Systematizing 
Special  Features  of  the  Systcmatizcr's  Work 
Office  Appliances 


335 


FORMS 

Financial  Statements  and  Reports 

1.  Industrial  Manager's  Monthly  Balance  Sheet 

2.  General  Manager's  Daily  Report 


Page 
.   341 


Controlling    Accounts  —  Liability 
Profit  and  Loss  Accounts 

Liabilities — D.  Current 

Liabilities — E.  Reserves 

Liabilities— F.  Capital,  Bonds,  and  Mortgages 

Profit  and  .Loss — G.  Revenues 

Profit  and  Loss— H.  Costs 

Profit  and  Loss — J.  Expenses 

K.  Profit  and  Loss 

Taking  the  Inventory   .       .       .       , 

Preliminary  Steps 
Formal  Announcement 
Organizing  the  Force 
Classification  of  Assets 
Pricing  the  Inventory 


AND 


299 


Purchasing 
3. 
4. 

5. 
6. 
7. 
8. 


AND  Receiving 

Purchase  Requisition 
Purchase  Order 
Purchase  Order  Tickler  Card 
Material  Receipt  and  Notice 
Purchase  Order  Numbers 
Claim  Voucher 


351 


General 


317 


Stores     .... 

9.  General  Stores  Record 

10.  General  Stores  Requisition 

11.  Stores  Credit  Memorandum 

12.  Shop  Stores  Requisition 


Component  and  Finished  Stores 

13.  Component  Stores  Record 

14.  Finished  Stores  Record 


•  357 


.  361 


XIV 

Stores- 


contents 


•Special  Forms 

15.  Assembly  Requisition 

16.  Production  Order  Distribution  of  Material 

17.  Assembly  Production  Order  Material  Distribution 

18.  Stores  Clerk's  Order 

19.  Goods  Returned  to  Us  Memorandum 


Page 
365 


CONTENTS 


XV 


Page 


Preparation  for  Production    . 

20.  Piece  Key  Card 

21.  Part  Key  Card 

22.  Unit  Key  Card 

23.  Drawing  and  Tracing  Card 

24.  Pattern  Record  Card 

25.  Pattern  Location  Card 


371 


Machine 


AND  Tool  Studies     . 

26.  Machine  Study  Card 

27.  Tool  Key  Card 

28.  Tool  Set-up  Key  Card 

29.  Fixture  and  Die  Key  Card 

30.  Operation  Study  Card 

31.  Motion  Study  Card 

32.  Motion  Study  of  Operations 

33.  Operation  Key  Card 

34.  Rate  Memo 


Schedules  and  Charts       .... 

35.  Manufacturing  Order 

36.  Production  Schedule 

37.  Purchase  Order  Schedule 

38.  Graphic  Chart— Component  Schedule 

39.  Graphic  Chart— Unit  Schedule 

Forms  Relating  to  Production 


377 


Premium  Production  Ticket,  including  Time  on 

Premium  Ticket 
Daily  Day-Work  Production  Time  Slip 
Daily  Piece-Work  Production  Time  Slip 
Daily  Premium  Production  Time  Slip 
Daily  Defective  Repairs  Time  Ticket 
Daily  Waiting  Time  Ticket 
Daily  Betterment  Time  Ticket 

53.  Daily  Repair  Time  Ticket 

54.  Daily  Prorating  Order  Time  Ticket  ^ 
Daily  Non-productive  Labor  Time  Ticket 
Supplementary  Tag 
Rejected  for  Scrap  Tag 
Rejected  for  Defective  Repairs  Tag 
Order  Control  Chart 
Order  Control  or  Planning  Board 


46. 

47. 
48 
49 
50 
51 
52. 


55. 
56. 
57. 
58. 
59. 
60. 


Forms  Relating  to  Labor 


405 


.  387 


40.  Production  Order 

41.  Betterment  Order 

42.  Repair  Order 

43.  Tracing  Tag 

44.  Day-Work  Production  Ticket,  including  Time  on 

Day-Work  Ticket 

45.  Piece- Work  Production  Ticket,  including  Time 

on  Piece- Work  Ticket 


391 


61.  Application  for  Employment 

62.  Letter  Application  for  Employment 

63.  Reference  Inquiry  Letter 

64.  Requisition  for  Help 

65.  Employee's  Rate  Card,  including  Absent  Record 

66.  Introduction  Card 

67.  Change  in  Rate  Card 

68.  Change  of  Department  Card 

69.  Report  of  Absentees 

70.  Quitting  Card,  including  Record  of  Employee 

71.  Monthly  Record  of  Employees  Dismissed  or  Re- 

signed 

72.  Pay  Check  and  Time  or  Clock  Card 

73.  Time  Sheet  (First  Method) 

74.  Time  Sheet  (Second  Method) 

75.  Pay  Check  and  Time  or  Clock  Card   (Second 

Method) 

Organization  Chart  ;  Distribution  and  Analysis 
Sheets ^^^ 

76.  Organization  Chart 

77.  Factory  Overhead  Distribution  Sheet 


XVI 


CONTENTS 


Page 


78.  Record  of  Production,  Betterment,  and  Repair 

Orders 

79.  Production  Cost  Card 

80.  Sales  Analysis  Sheet 

Commercial  Accounting 431 

81.  Purchase  Voucher 

82.  Voucher  Tickler 

83.  Charge  Voucher 

84.  Voucher  Record 

85.  Incoming  Cash  Sheet 

86.  Check  Record 

87.  Petty  Cash  Voucher 

88.  Petty  Cash  Disbursements  Sheet 

89.  Journal  Register 

90.  Journal  Voucher 

91.  Commercial  Expense  Distribution  Sheet 


Chart  of  Controlling  Accounts 

92.  Chart  of  Controlling  Accounts 

Inventory  Records       .       .       .       . 

93.  Inventory  Tag 

94.  Equipment  Record 

Form  95.  Stores  Ledger  .   .   . 


443 


445 


449 


Unified  Accounting  Methods  for 

Industrials 


CHAPTER   I 

THE    DEVELOPMENT,    ELEMENTS,    AND     RE- 
SULTS  OF  INDUSTRIAL  OR  EFFICIENCY 

ENGINEERING 

A  statement  of  facts  in  connection  with  the 
development  of  accounting  and  industrial 
engineering,  giving  specific  instances  of  the 
improved  conditions  brought  about  in  various 
industries  by  the  application,  in  their  different 
phases,  of  one  or  both  of  these. 


I 


CHAPTER   I 

THE    DEVELOPMENT,    ELEMENTS,    AND    RE- 
SULTS OF  INDUSTRIAL  OR  EFFICIENCY 

ENGINEERING 

A  New  Profession 

During  the  last  few  years  a  new  profession  has  been 
slowly  developing  in  the  industrial  world,  sometimes  called 
industrial  engineering,  sometimes  efficiency  engineering,  or 
again  production  engineering.  While  this  in  time  promises 
to  be  one  of  the  most  important  of  the  engineering  pro- 
fessions, up  to  the  present  moment  it  has  not  received  the 
recognition  required  to  clothe  it  with  the  dignity  of  a 
collegiate  degree  as  in  other  branches  of  engineering,  and  its 
importance  is  but  dimly  recognized  by  manufacturers  in 
general,  owing  to  the  fact  that  the  work  of  this  new 
profession  has  been  done  under  many  different  names,  and 
by  a  wide  diversity  of  individual  effort. 

To  trace  the  development  of  industrial  engineering  in 
detail  would  mean  the  writing  of  several  books.  Therefore, 
in  the  present  instance,  the  primary  purpose  will  be  an 
effort  to  explain  its  scope,  some  of  the  results  obtained 
by  its  application  to  industrials,  the  necessity  that  exists 
for  such  special  service  as  the  industrial  engineer  has  to 
offer,  and  in  so  far  as  possible  to  establish  certain  standards 
for  this  new  profession. 

Conditions  Which  Make  Industrial  Engineering  Necessary 

The  average  manufacturer  of  today  might  be  called  the 
most  magnificent  gambler  the  world  has  ever  known.     He 

3 


^  UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

is  a  buyer,  a  producer,  a  seller,  and  a  financier ;  and  in  each 
of  these  phases  of  his  business  he  takes  a  hundred  chances 
where  his  business  brother,  the  banker,  on  the  one  hand, 
takes  none,  and  the  merchant,  on  the  other,  perhaps  ten. 

This  relative  business  worth  is  reflected  in  every 
banker's  attitude  toward  an  industrial,  for,  in  making  it  a 
loan,  he  will  almost  invariably  ignore  fixed  assets  or  per- 
manent investment  and  loan  on  quick  assets  only  to  the 
extent  of  about  fifty  cents  on  the  dollar;  whereas  he  will 
loan  a  merchant  sometimes  as  high  as  70%  of  his  entire 
inventory  and  will  take  the  securities  of  other  banks  at  par. 

It  might  almost  be  said  that  banking,  the  world  over, 
is  done  today  under  a  unified  code  of  standards,  insuring 
not  only  safety  to  the  banker  and  to  the  depositor,  but  an 
earning  on  investments  as  well.  Merchandising  is  also  con- 
ducted under  a  unified  code  of  standards  that  minimizes  the 
risk ;  yet,  there  are  somewhere  near  400,000  manufacturing 
concerns  in  this  country  today  whose  methods  of  handling 
the  same  industrial  problems  are  as  diversified  as  are  the 
things  they  make  and  the  men  who  make  them,  and  who, 
for  lack  of  unified  standards  to  work  under,  are  jeopardiz- 
ing the  interests  of  both  labor  and  capital — and  jeopardizing 
them  to  such  an  extent  that  it  is  little  wonder  that  labor 
forms  unions  to  protect  itself,  and  that  capital  will  buy 
average  industrial  stocks  or  bonds  only  at  a  big  discount; 
in  other  words,  on  a  speculative  or  gambling  basis. 

In  saying  that  a  manufacturer  is  taking  considerable 
risks,  it  is  not  meant  that  he  does  so  from  choice  or  that 
his  chance-taking  is  directly  connected  with  money  trans- 
actions, but  rather  that  it  is  due  to  the  nature  of  the  things 
in  which  he  is  obliged  to  invest  his  money. 

For  instance,  he  gambles  with  inventions,  the  develop- 
ment of  which  is  always  a  pure  experiment.  Many  fac- 
tories, especially  automobile  factories,  are  today  filled  with 


EFFICIENCY    ENGINEERING  e 

obsolete  materials  which,  sooner  or  later,  must  be  charged 
to  profit  and  loss  as  a  result  of  such  experiments. 

The  manufacturer  gambles  in  buying  equipment,  which 
may  become  obsolete  before  it  shows  visible  wear,  due  to 
the  development  of  more  efficient  machines  for  doing  the 
same  work. 

He  gambles  every  time  he  employs  a  new  superintendent 
or  foreman,  for  the  man's  real  knowledge  may  or  may  not 
be  to  his  advantage. 

He  gambles  every  time  he  takes  on  a  new  workman, 
for  the  man's  efficiency  as  regards  quantity  and  quality 
of  work  can  only  be  determined  by  a  try-out. 

And  so,  failing  to  take  into  his  reckoning  all  the  costs 
of  these  uncertainties  in  his  business,  he  takes  a  final  gamble 
by  meeting  his  competitor's  price,  who  in  turn  is  doing 
exactly  the  same  thing,  with  the  result  that  sooner  or 
later  they  are  both  swallowed  up  by  industrial  failures. 

It  is  these  conditions  in  the  industrial  world  that  have 
given  birth  to  the  new  profession  called  "Industrial  or  Ef- 
ficiency Engineering,"  the  purpose  of  which,  broadly  speak- 
ing, is  to  provide  the  manufacturer  with  a  unified  code  of 
standards  to  work  under,  which  will  put  him  on  or  some- 
where near  the  same  basis  as  the  banker  and  the  merchant 
in  chance-taking. 

Phases  of  Industrial  Engineering 

The  development  of  industrial  engineering  has  thus  far 
been  effected  not  through  any  educational  institution,  but 
by  two  separate  and  distinct  professions  or  classes  of  men : 
the  industrial  or  factory  accountant,  sometimes  called  a 
systematizer ;  and  the  mechanical  engineer,  sometimes 
called  an  efficiency  or  production  engineer.  Both  are  nec- 
essary to  complete  the  work  of  industrial  engineering,  but 
neither  can  do  very  much  alone,  for  the  simple  reason  that 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


EFFICIENCY    ENGINEERING 


the  function  of  the  former  is  largely  analytical  in  its  nature, 
dealing  only  with  results  as  a  finality,  while  that  of  the 
other  is  essentially  creative,  deaHng  almost  wholly  with 
causes.  In  other  words,  the  one  enables  an  executive  to 
measure  results  obtained,  while  the  other  sets  into  activity 
causes  that  make  possible  a  predetermination  of  results. 
One  has  worked  from  the  top  down  by  the  process  of 
deduction,  while  the  other  has  worked  from  the  bottom  up 
by  devising  means  for  eliminating  unnecessary  waste;  the 
combined  effort  of  both  resulting  in  a  standardization  of 
factory  operations. 

Therefore,  to  qualify  as  an  industrial  engineer,  a  man 
must  not  only  be  a  master  of  both  of  these  professions, 
but  also  be  able  to  reconcile  the  necessary  workings  of  one 
with  the  other. 

Principles  of  Industrial  Engineering 

The  analytical  work  that  has  been  done  by  industrial 
engineers  in  the  last  few  years  has  been  something  tre- 
mendous, and  out  of  it  have  been  developed  certain 
principles  that  will  go  a  long  way  toward  the  required 
unified  code  of  standards.  For  instance,  in  industrial  ac- 
counting, the  following  facts  have  been  developed  and 
standardized : 

1.  That  no  matter  what  a  concern  manufactures,  the 
elements  of  operation  always  reduce  themselves  to  the  same 
primes — namely,  labor,  material,  and  expense — and  are 
therefore  identical  in  accounting  work  for  any  and  all  manu- 
facturing concerns. 

2.  That  in  principle,  the  accounting  of  investments  and 
depreciation  are  the  same  in  every  manufacturing  business. 

3.  That  in  addition  to  depreciation,  two  accounts  should 
be  maintained — one  for  obsolete  equipment  and  one  for 
obsolete  materials. 


'3 


4.  That  to  secure  uniformity  of  costs,  repairs  to  fixed 
assets  should  no  longer  be  treated  as  an  expense,  but  charged 
to  depreciation. 

5.  That  labor,  material,  and  expense  constitute  the 
units  of  measure  for  cost  of  production.  Therefore,  the 
total  monthly  value  of  these  for  any  plant  must  be  converted 
into  actual  inventoried  assets  each  month. 

6.  That  the  commercial  transactions  of  an  industrial 
concern  have  absolutely  nothing  to  do  with  production  or 
the  costs  of  production.  Therefore,  accountants  must  sep- 
arate absolutely  such  expenditures  from  the  operations  of 
a  factory. 

7.  That  in  addition  to  the  usual  accounts  of  assets  and 
liabilities,  there  are  four  analytical  accounts — one  of  profit 
and  loss;  one  of  commercial  expense;  one  of  factory  over- 
head; and  one  of  factory  production. 

8.  That  through  controlling  accounts,  the  wide  variables 
in  factory  overheads  are  distributed  so  as  to  make  the  costs 
of  production  uniform. 

9.  That  costs  divide  themselves  into  two  distinct  phases : 
those  which  pertain  to  production,  or  flat  costs,  and  those 
which  pertain  to  expense  which  in  turn  must  be  absorbed 
into  costs  of  production.  A  careful  departmental  distribu- 
tion of  these  expenses  is  therefore  of  the  utmost  impor- 
tance. 

Distribution  of  Expense 

There  is  nothing  that  will  mislead  the  management  of  a 
concern  more  than  a  lump  sum  prorating  of  expense  over 
the  product  made,  and  a  large  percentage  of  industrial  fail- 
ures can  be  attributed  to  this  cause  alone,  which  too  often 
results  in  a  selling  of  goods  below  cost  or  at  no  profit,  as 
the  following  instances  well  illustrate : 

A  large  concern  manufacturing  automobile  parts  and 


8 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


kindred  lines  took  in  a  great  deal  of  outside  contract  work, 
especially  for  drop  forgings  and  nickel-platings.  They  were 
always  successful  in  getting  all  of  the  drop  forging  con- 
tracts they  wanted,  but  were  unsuccessful  in  getting  nickel- 
plating  contracts.  The  general  overhead  applied  to  every- 
thing in  connection  with  the  factory  was  125%.  In  making 
up  their  estimates,  this  was  applied  to  both  nickel-plating 
work  and  drop  forge  work;  but  the  real  facts  of  the  case 
were  that  the  general  overhead  of  the  drop  forge  depart- 
ment, as  a  factory  in  itself,  was  about  190%.  Using  only 
125%,  they  were  always  low  in  their  bids  for  drop  forge 
work,  and  consequently  secured  plenty  of  business;  while 
the  reverse  was  the  condition  in  the  nickel-plating  plant,  in 
which  the  overhead  instead  of  being  125%  was  only  about 
50%.  Consequently,  in  estimating,  125  %>  always  made 
the  bids  for  this  department  too  high,  with  the  result  that 
they  could  get  no  business. 

This  illustration  shows  the  absolute  necessity  for  de- 
partmental overheads  when  outside  contracts  are  taken  into 
the  factory  to  fill-in  with  in  some  one  department.  This 
particular  drop  forging  department  had  done  work  for  noth- 
ing, or  at  a  loss,  for  nearly  ten  years  before  the  fact  was 
discovered. 

To  cite  another  case  in  point,  a  large  furniture  manu- 
facturer had  for  years  used  a  common  overhead  percentage 
on  his  production.  As  a  result,  when  a  thorough  analysis 
of  his  business  was  made  and  a  departmental  overhead  was 
applied,  it  was  proved  that  out  of  over  700  pattern  numbers, 
154  were  being  sold  at  an  actual  loss  and  144  more  yielded 
from  none  to  less  than  5%  profit,  with  the  result  that  nearly 
40%  of  the  business  done  every  year  had  been  wasted  effort. 
Yet,  on  the  basis  of  his  own  figures,  which  spread  the 
common  overhead  over  both  labor  and  material,  everything 
had    previously    shown    a    profit.      The    first    year    after 


EFFICIENCY    ENGINEERING  g 

all    adjustments    were    completed,    the    net    profits    in- 
creased 13^%. 

As  another  instance,  a  large  foundry  had  always  done 
all  its  costing  on  a  *'per  pound"  basis.  That  is,  the  total 
expense  for  labor,  material,  etc.,  in  the  foundry  was  always 
divided  into  the  tonnage  obtained,  and  thus  reduced  to  a 
cost  per  pound  for  the  entire  output.  An  analysis  of  the 
moulding  work  alone  showed  that  these  costs  were  wholly 
erroneous.  For  example,  the  cost  of  moulding  one  pattern 
weighing  200  pounds  was  $1.85 ;  while  the  cost  for  moulding 
on  another  pattern  of  exactly  the  same  weight  was  $4.  The 
average  of  the  two  pieces  would  be  $2.92  each  for  mould- 
ing, which  would  be  wrong  in  both  instances,  as  it  would 
be  too  high  for  one  and  too  low  for  the  other. 

It  can  readily  be  seen  how  such  a  condition  as  this  would 
affect  estimating  on  job  work,  or  costs  on  regular  produc- 
tion. To  rectify  the  matter,  costing  was  put  on  a  "per 
pattern"  basis  which  resulted  in  a  very  marked  difference  in 
making  estimates,  and  increased  the  net  profits  of  the  con- 
em  nearly  9%  for  the  first  year. 

Unified  Accounting 

In  connection  with  accounting,  all  the  requirements 
for  an  industrial  concern  have  been  standardized  and 
unified  by  means  of  a  set  of  controlling  accounts  which 
give  a  manufacturer  as  much  detailed  information  about 
the  operations  of  his  factory  and  its  output  as  they  do  about 
the  operations  of  his  sales  force  or  the  condition  of  his 
finances. 

These  principles  have  been  so  well  worked  out  that  they 
will  apply  to  any  manufacturing  plant,  the  only  difference 
being  the  nomenclature  required  to  classify  the  details  of 
any  particular  business,  such  as  (1)  the  kind  of  labor,  (2) 
the  kind  of  material,  (3)  the  kind  of  expense,  and,  (4)  the 


lO 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


kind  of  output  that  is  manufactured.  Any  manager  who  has 
once  learned  to  interpret  figures  from  an  accounting  system 
based  on  such  principles,  can  apply  them  to  any  other  busi- 
ness, no  matter  how  different  it  may  be  in  its  nature. 

The  development  and  standardization  of  a  unified 
method  of  accounting  had  of  necessity  to  come  first,  other- 
wise the  engineer  would  have  had  no  way  of  measuring  the 
actual  value  of  economies  that  he  might  effect.  Using  such 
methods  his  analytical  work  has  been  far-reaching,  and,  as 
a  result,  he  is  today  able  to  predetermine  the  operating 
conditions  required  for  many  kinds  of  industrial  plants.  In 
doing  this,  however,  he  realizes  at  the  outset  that  in  working 
toward  better  conditions  in  any  manufacturing  business, 
the  real  purpose  should  be  to  increase  production  per  unit 
of  investment  and  cost.  This  is  wherein,  as  an  engineer, 
he  differs  from  the  industrial  accountant  or  systematizer, 
for  usually  the  very  first  subject  he  takes  up  is  to  determine 
from  the  nature  of  the  product  made  the  equipment  used, 
the  labor  employed,  whether  or  not  the  plant  is  yielding 
all  the  output  it  should  for  the  investment  made,  and,  to 
determine  this,  he  must  first  standardize  the  product  manu- 
factured as  regards  kind  and  variety. 

Unified  Output 

An  analysis  of  present-day  factories  would  show  that 
most  of  them  are  making  two  or  three  times  the  variety 
of  items  that  they  should  for  the  volume  of  their  output; 
that  in  many  instances  they  are  really  doing  a  jobbing 
business  and  not  a  manufacturing  business;  that  they  set 
up,  knock  down,  and  set  up  on  machine  tools  so  often 
in  changing  from  one  kind  of  work  to  another,  that  their 
costs  of  production  are  abnormally  high,  and  the  workman- 
ship usually  poor ;  that  all  this  results  in  large  waste  through 
spoiled  work  and  an  excessive  investment  in  small  tools — 


EFFICIENCY    ENGINEERING 


II 


to  say  nothing  of  the  lost  time  of  machines,  which  in  itself 
greatly  reduces  the  output. 

This  unscientific  policy  is  usually  found  in  concerns  that 
are  dominated  by  a  sales  policy  rather  than  a  manufacturing 
one.  Investment  in  a  manufacturing  business  is  for  the 
purpose  of  producing  some  item  or  items  that  will  meet 
with  a  steady  market  by  virtue  of  merit  and  price.  This 
can  only  be  done  by  a  low  cost  of  production.  Therefore, 
the  first  aim  of  any  manufacturing  concern  should  be  to 
keep  its  investment  busy  every  minute  of  the  time  in  order 
to  obtain  this  low  cost,  and  any  concern  not  doing  so  is 
usually  dominated  by  an  administration  that  has  not  suf- 
ficient control  of  its  market  or  sales  force  to  warrant  the 
investment ;  in  other  words,  stockholders'  interests  have  not 
been  properly  taken  care  of. 

The  big  money-making  plant  of  today  is  the  one  that 
makes  a  small  variety  and  a  large  volume  of  each  thing 
that  it  produces.  The  concern  that  makes  a  large  variety 
and  a  small  output  of  each  item  is  subject  to  such  high 
costs  of  production  and  fluctuation  in  volume  of  output  per 
item,  that  it  can  never  meet  the  competition  of  those  who 
manufacture  on  a  scientific  basis.  Those  who  manufacture 
in  an  unscientific  way  are  merchants  rather  than  manufac- 
turers and  use  the  factory,  with  all  of  its  investments,  as  a 
servant  for  the  sales  department. 

Function  of  a  Sales  Department 

Almost  any  business  manufacturing  on  a  proper  basis 
and  making  good  dividends,  simply  uses  the  sales  depart- 
ment as  a  servant  to  its  investment,  and  does  not  allow  it 
in  any  way  to  interfere  with  manufacturing  operations  after 
designs  are  once  accepted  by  it.  The  management  of  such 
a  factory  standardizes  its  product,  schedules  it  to  the  extent 
that  will  keep  the  investment  and  labor  busy,  and  then  de- 


12 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


EFFICIENCY    ENGINEERING 


13 


mands  of  the  sales  department  that  it  shall  sell  the  specified 
output  in  its  standard  form.  There  is  usually  no  difficulty 
in  doing  this,  as  such  a  manufacturing  policy  always  brings 
high  quality  and  low  costs — the  only  two  things  in  the  world 
that  can  win  every  time  in  competition,  provided  always, 
of  course,  that  in  design  and  utility  the  product  made  is 
up  to  some  recognized  standard.  Salesmen  and  sales  man- 
agers are  only  human,  and  work  along  the  lines  of  least 
resistance,  usually  with  the  idea  that  the  larger  the  variety 
of  items  they  have  to  sell,  the  better  they  can  control  the 
market  and  make  sales.  This  may  be  true  from  their  point 
of  view,  but  when  variety  reaches  a  point  where  it  so  in- 
creases cost  as  to  rob  sales  of  all  profit,  the  policy  is  fatal. 
Therefore,  standardization  of  the  product  is  the  engineer's 
first  problem.  The  result  of  correcting  such  conditions  is 
well  illustrated  by  the  following  examples. 

Results  of  a  Unified  Output 

In  one  instance  a  variety  of  89  Items  of  manufacture 
was  made.  The  annual  net  profits  of  the  business  averaged 
5j^%.  A  careful  analysis  brought  out  the  fact  that  the 
sales  on  many  items  were  so  small  as  to  make  them  profit- 
less. In  some  instances  they  were  made  at  a  loss,  due  to 
high  costs  of  production,  because  of  the  small  quantity 
made.  The  variety  was  reduced  from  89  to  56  profitable 
items.  The  factory  was  put  on  a  schedule  basis  of  fairly 
long  runs  for  each  different  piece  manufactured.  By  this 
means,  the  cost  of  production  was  so  greatly  reduced  that, 
notwithstanding  a  considerable  reduction  in  sales  price, 
which  increased  the  volume  of  sales  nearly  50%,  a  net 
profit  of  143^  %  was  realized  the  year  following. 

Another  instance  along  these  same  lines  was  one  con- 
nected with  the  manufacture  of  units  of  very  small  value, 
viz. :  buttons.    The  concern  in  question  manufactured  about 


a  thousand  varieties.  The  introduction  of  an  analytical  cost 
system  revealed  the  fact  that  out  of  the  thousand  kinds 
nearly  600  kinds  were  sold  at  absolutely  no  profit  or  at  a 
loss.  The  total  volume  of  business  was  in  the  neighborhood 
of  $400,000  a  year.  The  concern  paid  small  dividends,  but 
could  have  paid  the  same  dividend  on  an  output  of  less 
than  $200,000.  Improved  methods  of  manufacture  re- 
covered a  profit  on  a  little  over  300  of  the  kinds  that  had 
previously  been  profitless,  and  the  manufacture  of  the  other 
kinds  was  abandoned.    Result — a  10%  dividend  instead  of 

Another  instance  and  one  of  considerable  interest,  was 
in  connection  with  a  concern  manufacturing  bicycles  and 
kindred  lines.  The  first  complaint  the  manager  made  was 
that  his  order  department  was  continually  in  a  mess  and 
he  wanted  that  straightened  out  first.  A  thorough  investi- 
gation revealed  the  fact  that  (as  is  the  custom  in  such  a 
business)  he  gave  a  large  number  of  options  in  the  shape  of 
tires,  pedals,  saddles,  handle-bars,  etc.,  on  each  model  of 
bicycle  that  he  made,  with  the  result  that  on  one  individual 
model  of  bicycle  414  separate  and  distinct  purchase  orders 
could  be  made.  As  he  manufactured  several  models,  it  is 
little  wonder  that  his  order  department  was  in  a  continual 
state  of  confusion.  The  remedy  was  to  cut  out  the  options 
as  far  as  possible  and  to  standardize  the  entire  line.  By 
doing  this  his  inventory  on  materials  was  reduced  27%, 
and  for  the  first  time  in  seven  years  the  concern  paid  a 
dividend. 

Stabilizing  Production 

Another  cause  for  many  industrial  disasters  is  that  many 
merchant  managers  run  their  factories  altogether  too  much 
according  to  varying  sales  conditions,  increasing  and  de- 
creasing their  output  and  the  amount  of  labor  employed 


14         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

accordingly.  On  this  account  their  investments  are  idle  a 
great  deal  of  the  time,  simply  showing  that  plant  investments 
have  been  made  out  of  proportion  to  the  market  under 
control.  More  money  could  be  made  by  cutting  selling 
prices  and  keeping  the  investment  and  labor  busy,  because 
the  difference  in  cost  of  production  would  make  this  possible. 
An  instance  which  brings  out  the  above  facts  very 
forcibly  was  a  concern  which  manufactured  lamps  of  a  cer- 
tain kind  as  one  department  of  its  business.  This  department 
had  lost  the  company  $25,000  the  previous  year  and  they 
were  about  to  abandon  it.  Before  doing  so,  however,  they 
called  in  an  industrial  engineer  to  discover,  if  possible,  what 
was  wrong. 

A  careful  investigation  of  the  lamp  department  showed 
that  the  costs  were  abnormally  high  because  the  lamps  were 
made  up  on  order,  that  is,  as  they  secured  one  contract 
after  another.  The  quantities  put  through  the  factory  varied, 
being  sometimes  very  small  and  sometimes  quite  large. 
The  engineer  decided  that,  unless  the  volume  of  business 
could  be  increased  about  fourfold,  it  would  be  necessary  for 
them  to  abandon  the  manufacture  of  lamps. 

With  this  information  in  hand,  he  studied  out  just  what 
the  costs  ought  to  be,  provided  such  a  volume  of  business 
could  be  put  through  the  factory  on  a  schedule  basis.  His 
report  to  the  manufacturers  stated  that  they  ought  to  save 
about  16%  on  the  cost  of  production,  and  that  by  virtue  of 
this  reduction,  they  could  cut  their  sales  price  10%  or 
12%.  Such  a  cut  would  undoubtedly  increase  their  sales 
up  to  the  required  amount. 

After  due  consideration,  the  concern  agreed  to  the  sug- 
gestions of  the  engineer,  and  instructed  him  to  take  hold  of 
the  proposition  from  a  manufacturing  point  of  view.  This 
he  did,  and  as  an  actual  result  made  a  reduction  in  costs  of 
18%,  while  sales  increased  something  over  threefold,  and  a 


EFFICIENCY    ENGINEERING 


15 


profit  of  over  $8,000  was  produced  in  the  lamp  department 
the  first  year. 

This  same  condition  often  exists  where  a  concern  makes 
for  its  own  use  items  that  are  a  standard  in  the  open  market. 
Their  quantity  requirements  are  often  too  small  and  the 
variety  too  great  for  economical  production. 

For  example,  in  a  medium-sized  concern  that  made 
freight  cars,  they  had  always  made  their  own  bolts.  As 
they  never  had  any  cost  system,  they  supposed,  of  course, 
they  could  make  their  own  bolts  much  cheaper  than  they 
could  buy  them.  A  careful  working  out  of  costs  showed 
that  it  was  costing  13%  more  to  make  their  bolts  than  to 
buy  them,  notwithstanding  the  fact  that  they  had  good  ma- 
chinery for  bolt-making.  The  reason  was  easily  ascertained. 
The  quantity  was  too  small  and  the  variety  too  great,  and 
they  changed  so  often  on  the  machines  that  these  latter  were 
idle  half  the  time.  They  never  ran  through  more  than 
4,000  or  5,000  bolts  at  a  time;  and  it  was  found  that  they 
would  have  to  run  through  at  least  25,000  bolts  at  a  time 
in  order  to  make  them  at  a  cost  equal  to  that  for  which  they 
could  be  bought. 

As  a  result  of  this  careful  study,  the  management  ob- 
tained outside  contracts  sufficient  to  give  them  the  quantity 
of  production  needed  to  produce  their  own  bolts  cheaply. 

Standardizing  Output 

All  of  the  foregoing  instances  simply  illustrate  the  pro- 
cess of  trimming  down  variety;  or,  in  other  words,  a 
standardizing  of  the  things  to  be  sold.  The  real  standardi- 
zation of  production  comes  in  studying  the  possibilities  for 
using  as  many  of  the  same  pieces  or  parts  on  different 
models  or  units  as  possible,  and  a  careful  analysis  of  the 
operations,  equipment,  and  labor  required  for  producing 
these. 


i6 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


In  one  instance  a  builder  of  houses  designed  the  pieces 
and  parts  for  a  roof  so  cleverly  that  eighteen  distinctly 
different  roof  models  could  be  built  from  the  same  cuttings. 

In  a  large  concern  manufacturing  harvesting  machines, 
the  inventories  of  raw  material  were  reduced  nearly  a  third 
by  an  analysis  of  this  kind,  which  revealed  the  fact  that 
there  was  not  enough  difference  in  many  of  the  flat,  round, 
and  angle  irons  used  on  the  various  models  made  to  affect 
them  mechanically.  This  also  applied  to  bolts,  screws,  rivets, 
and  many  small  castings.  Standardizing  these  parts  not 
only  resulted  in  reducing  the  inventory,  but  gave  much 
larger  runs  in  each  set-up  of  a  machine,  producing  marked 
economies  in  this  way. 

In  an  automobile  plant  making  three  sizes  of  motors  and 
eleven  automobile  models,  a  standardization  of  parts  resulted 
in  effecting  an  interchangeability  of  individual  pieces  to 
such  an  extent  that  1,160  were  discontinued.  This  not  only 
greatly  reduced  raw  material  and  repair  parts  inventories, 
but  greatly  increased  the  factory  output  and  eliminated  many 
of  the  shortage  troubles.  This,  like  the  harvesting  machine 
concern,  was  simply  a  case  where  the  engineering  depart- 
ment and  the  manufacturing  department  had  worked  on 
independent  lines.  Designers  are  not  always  manufacturers, 
and  as  a  consequence  do  not  always  take  possibilities  of  this 
kind  into  account. 

Weil-Balanced  Equipment 

After  an  analysis  of  this  kind,  the  industrial  engineer 
takes  up  the  study  of  operations  to  be  done  on  the  different 
pieces  and  parts  made  and  the  equipment  available  for  doing 
the  work,  both  as  regards  quality  and  quantity;  and  right 
here  is  where  he  runs  across  some  very  difficult  problems 
to  solve. 

If  it  were  possible  to  get  a  total  of  idle  time,  and  conse- 


EFFICIENCY    ENGINEERING 


17 


quently  investment  in  unused  tools  and  equipment,  it  would 
be  startling.  The  principal  cause  for  this  condition  is  that, 
in  many  lines  of  manufacture,  various  departments  and  the 
equipment  of  same  are  not  so  balanced  with  other  depart- 
ments as  to  produce  a  uniform  output.  An  examination 
of  almost  any  factory  would  reveal  the  fact  that  many  ma- 
chines are  idle  from  half  to  two-thirds  of  the  time,  while 
other  machines  are  not  of  sufficient  capacity  to  meet  the 
demands  made  on  them,  even  by  running  them  overtime. 

To  illustrate  this  point  more  fully,  an  actual  instance 
may  be  cited : 

A  certain  plant  had  a  total  investment  of  about  $800,000, 
yielding  an  average  annual  output  of  about  $900,000.  In 
this  plant,  some  of  the  departments  and  machine  tools  during 
certain  portions  of  the  year  ran  overtime  and  night  shifts, 
while  others  had  scarcely  enough  to  keep  them  busy  nine 
hours  a  day  and  many  were  not  used  an  average  of  three 
days  a  week. 

Fortunately,  this  company  had  plenty  of  opportunity  to 
expand  its  market,  as  it  made  only  about  6%  of  the  total 
market  requirements  in  its  particular  line.  Therefore,  the 
expert  went  to  work  to  find  out  what  should  be  done  to 
balance  up  the  output  and  the  equipment  in  the  plant.  A 
careful  analysis,  by  operations,  of  the  product  manufactured, 
and,  a  detailed  study  of  what  could  be  done  upon  each 
machine,  together  with  its  capacity  for  doing  the  work 
required,  showed  that  the  factory  turned  out  its  annual 
output  by  running  some  machines  eighteen  months  on  a  ten- 
hour  basis;  while  others  were  required  but  four  or  five 
months  on  the  same  basis. 

Under  these  conditions,  the  problem  was  to  shift  the 
work  around  on  different  rhachine  tools,  to  find  out  just 
what  machinery  should  be  bought  so  as  to  balance  up  the 
output,  to  keep  all  of  the  machine  tools  busy  all  of  the  time. 


1 8         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

and  to  ascertain  what  output  could  thus  be  obtained.  This 
took  the  time  of  a  number  of  men  for  several  weeks,  but 
the  results  obtained  warranted  the  expenditure  many  times 
over.  It  was  found  that  it  required  exactly  $69,000  worth 
of  added  machinery  to  balance  up  the  plant  for  a  uniform 
output  in  all  departments;  and  that  by  purchasing  this 
machinery,  the  output  could  be  increased  from  $900,000  to 
$1,500,000  per  annum. 

This  factory  gives  an  instance  where  a  $69,000  increase 
on  an  $800,000  investment  produced  an  output  66%  greater 
than  was  already  being  produced.  After  this  investment 
was  made,  all  overtime  and  night  shift  work  was  abolished. 
Looked  at  from  another  point  of  view,  on  a  $900,000  output, 
the  business  was  overinvested  in  by  at  least  $275,000;  and 
overinvestment  is  a  condition  in  hundreds  of  plants  today. 

Standardization  of  Labor 

Next,  and  perhaps  most  important  of  all,  comes  the 
standardization  of  labor  and  its  application  to  equipment 
usage — an  analytical  work  that  is  usually  done  under  the 
name  of  "scientific  management.*' 

In  most  factories,  both  foremen  and  men  do  work  after 
a  fashion  of  their  own,  according  to  their  individual  experi- 
ence and  judgment,  both  of  which  vary  greatly  with  different 
men.  Consequently,  there  is  no  standard  by  which  different 
men  shall  do  the  same  kind  of  work  so  as  to  produce  the 
same  results. 

As  men  leave  a  factory,  one  by  one,  and  others  take  their 
place,  methods  of  doing  the  work  vary  accordingly.  To 
what  extent  these  changes  take  place  may  be  readily  under- 
stood by  the  statement  that,  in  many  lines  of  manufacture, 
the  change  in  men  or  **labor  turnover,"  is  equal  to  the  entire 
force  annually.  There  are  some  automobile  concerns  where 
it  equals  two  and  one-half  times  the  average  working  force. 


EFFICIENCY    ENGINEERING 


19 


Consequently,  the  same  work  is  subject  to  many  different 
methods  of  handling  in  the  course  of  a  year,  with  the  result 
that  both  the  volume  of  output  and  the  costs  vary  greatly, 
as  does  also  the  quality  of  the  work  done. 

The  interchangeability  of  parts  on  American-made 
machinery  is  a  well-known  feature  and  has  been  brought 
about  by  a  standardization  of  the  various  products  made. 
Scientific  management  is  now  endeavoring  to  do  exactly  the 
same  thing  with  labor.  That  is,  it  is  determining  methods 
which  will  standardize  the  way  in  which  work  shall  be  done, 
irrespective  of  foremen's  or  men's  experience,  so  that  no 
matter  how  much  the  labor  factor  may  change  in  a  factory, 
the  work  will  always  be  done  in  exactly  the  same  way,  with 
the  same  accuracy,  and  with  practically  the  same  speed.  The 
greatest  obstacle  to  this  work  today  is  the  instability  of  labor 
in  general ;  there  is  little  use  in  taking  a  force  of  workmen 
through  a  course  of  motion  study  training  if  they  are  to 
leave  by  the  time  or  before  they  get  through  the  course. 
The  first  step  is  to  insure  (by  establishing  an  incentive  of 
some  kind)  a  stability  that  will  warrant  the  proposed  educa- 
tion in  efficiency. 

Adjustment  of  Labor  and  Equipment 

"Equipment"  must  also  be  considered  in  this  connection. 
If  observations  are  taken  on  twelve  different  men,  operating 
exactly  the  same  machine,  on  the  same  work,  in  the  same 
or  different  factories,  a  surprising  difference  will  be  found 
as  regards  both  the  quality  and  the  quantity  of  work  done. 
To  standardize  it,  the  possibihties  of  the  machine  and  its 
accessories,  in  the  shape  of  tools,  etc.,  as  wtII  as  the  operator 
who  runs  it,  must  be  studied.  That  is,  the  physical  motions 
of  the  man  in  handling  the  work  and  the  machine,  as  well  as 
the  performance  of  the  machine  itself  in  doing  the  work 
must  be  carefully  analyzed  and  synchronized.     This  only 


20 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


applies  to  the  individual  machine.     Attention  has  already 
been  called  to  the  grouping  of  machines  and  the  balancing  of 

the  equipment. 

Results  of  Scientific  Management 

In  concluding  this  introductory  statement  which  is  in- 
tended to  give  an  understanding  of  the  principles  of  scientific 
management  and  of  what  the  work  really  means,  a  brief 
review  of  some  actual  results  obtained  by  its  application 
may  be  interesting. 

In  a  plant  where  steam-heating  apparatus  was  manu- 
factured, a  man  had  worked  for  years  turning  a  certain 
piece  on  a  particular  machine.  He  had  always  been  paid 
by  the  day,  was  considered  a  good  man,  and  everyone  was 
satisfied  until  an  exponent  of  scientific  management  entered 
the  shop  to  study  its  operations. 

Among  many  other  operating  details  the  work  of  this 
man  received  attention  and  the  man,  the  work,  and  the 
machine  were  carefully  analyzed.  The  man  had  been 
receiving  $2  a  day,  and  he  turned  out  an  average  of  ten 
pieces  a  day.  In  other  words,  it  cost  the  company  20  cents 
a  piece  for  labor  on  his  work.  The  expert  insisted  that  a 
great  deal  more  could  be  obtained  from  the  man  and  the 
machine.  The  superintendent  did  not  believe  it,  but  was 
willing  to  try  out  the  suggestion  offered.  The  expert  told 
the  superintendent  that  the  work  was  worth  about  10  cents 
a  piece.  The  man  was  offered  10  cents  a  piece,  on  a  piece- 
work basis,  and  was  ready  to  quit  his  job,  but  the  superin- 
tendent prevailed  upon  him  to  try  it. 

To  give  the  workman  every  chance  to  succeed,  his  work 
was  laid  out  in  a  scientific  manner,  he  was  told  just  how  to 
handle  and  place  his  work  in  the  machine,  the  exact  speed 
the  work  was  to  be  run  at,  the  cut  that  was  to  be  taken  in 
the  metal  by  the  cutting  tool,  etc.,  etc.,  and  on  the  last  day 


EFFICIENCY    ENGINEERING 


21 


of  the  third  week  of  trial,  he  turned  out  thirty  pieces,  making 
$3  for  himself  instead  of  $2,  and  the  work  cost  his  employer 
only  10  cents  a  piece  instead  of  20  cents.  The  man  had 
literally  been  robbing  both  himself  and  his  employers  for 
years  without  either  one  of  them  being  aware  of  it,  which 
is  a  condition  that  exists  in  thousands  of  factories  today. 

In  another  instance,  there  was  to  be  made  in  a  factory 
a  certain  part  of  a  new  gasolene  engine.  Both  the  superin- 
tendent and  the  foreman  of  the  department  were  called  in 
by  the  expert  and  asked  what  they  thought  would  be  a  good 
record  day's  work  for  a  man  on  that  particular  piece.  Both 
of  these  men  were  old  employees  and  had  a  thorough  knowl- 
edge of  the  machine  on  which  the  work  was  to  be  done  and 
of  the  man  who  was  to  operate  it.  After  due  consideration, 
their  answer  was,  that  350  a  day  was  the  absolute  limit. 

In  the  meantime,  the  expert  had  studied  out  his  own 
method  of  handling  this  particular  piece  in  processing  it, 
the  speed  it  could  be  run  at,  the  changes  in  the  shape  of 
cutting  tools  that  were  necessary  to  remove  a  given  amount 
of  metal  in  a  given  time,  what  cuts  should  be  taken  first, 
and  just  how  the  work  and  the  machine  should  be  handled 
in  every  detail.  Having  this  knowledge  at  hand,  he  im- 
mediately told  the  superintendent  and  the  foreman  that  600 
was  to  be  the  limit  he  would  set  on  the  piece.  They  said 
emphatically  that  it  was  impossible,  but  at  the  end  of  the 
seventh  day  the  workman  turned  out  660  pieces  as  his  work 
for  that  day,  earning  a  bonus  of  10%. 

Broader  Applications  of  Scientific  Management 

These  two  instances  illustrate  only  individual  and  simple 
cases.  It  will  be  of  interest  to  see  how  this  sort  of  manajre- 
ment  has  worked  out  in  a  broader  application. 

A  certain  manufacturer  had  about  $300,000  invasted  in 
equipment.    His  factory  was  better  than  the  average,  and  so 


22 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


were  his  foremen  and  men.  An  increasing  demand  for  his 
output  brought  him  to  the  point  where  it  seemed  necessary 
to  spend  at  least  another  $100,000  for  equipment.  His 
factory,  however,  was  located  in  a  large  city,  every  inch  of 
floor  space  that  he  had  was  occupied,  and  there  was  no  op- 
portunity for  him  to  purchase  adjacent  property  for  expan- 
sion.    So,  a  move  was  staring  him  in  the  face. 

The  manufacturer  in  this  case  knew  little  or  nothing  of 
scientific  management,  for  always  having  had  a  good  money- 
making  business,  he  had  never  interested  himself  in  such 
questions.  However,  the  problem  was  a  difficult  one  and 
he  employed  an  expert  to  go  into  his  factory.  The  result 
of  the  expert's  recommendations  was  an  increase  of  33% 
in  the  output  of  the  factory  in  a  period  of  six  months.  In 
many  instances  the  work  of  individual  tools  was  doubled. 
On  some  it  was  increased  25%  to  30%.  The  expert  not 
only  saved  his  client  the  $100,000  investment,  but  also  the 
labor,  power  and  expense  that  would  have  been  required 
to  run  the  addition  to  the  factory  afterward.  In  fact,  he 
increased  the  efificiency  and  output  of  the  existing  equipment 
and  labor  to  such  an  extent  as  more  than  to  double  the  actual 
net  profits  of  the  business. 

In  the  three  cases  cited  on  the  foregoing  pages,  there 
was  unusual  opportunity  to  apply  the  principles  of  scientific 
management.  Experience  has  shown  that  some  kinds  of 
business  are  much  more  suited  to  these  labor  refinements 
than  are  others,  and  that  the  degree  to  which  they  can  be 
carried  depends  in  large  measure  on  the  nature  of  the 
business.  It  is  also  true  that  the  degree  of  efficiency  to 
which  labor  may  be  developed  depends,  in  large  measure, 
upon  the  stability  of  the  labor,  as  well  as  upon  the  kind  of 
output  manufactured.  For  example,  a  certain  concern  em- 
ployed 2,200  shop  hands  regularly;  yet,  during  twelve 
months  they  laid  off  5,380  hands.    Such  instability  of  labor 


EFFICIENCY    ENGINEERING 


23 


as  this  makes  the  ultra  refinements  of  scientific  management 
simply  out  of  the  question. 

In  conclusion,  one  more  instance  may  be  cited  to  show 
the  economies  obtained  through  putting  a  factory  and  a  sales 
department  on  a  schedule  basis : 

A  concern  manufacturing  furniture  handled  its  business 
as  do  all  such  concerns,  by  manufacturing  according  to  vary- 
ing stock  conditions.  That  is  to  say,  whenever  a  pattern 
number  ran  low,  a  cutting  order  was  put  in  for  some  quan- 
tity, according  to  the  superintendent's  or  manager's  judg- 
ment. Each  pattern  was  finished  up  to  a  certain  point,  and 
then  put  into  a  warehouse  until  shipped,  at  which  time  the 
final  finish  was  made.  This  resulted  in  three  undesirable 
conditions : 

1.  A  large  warehouse  inventory. 

2.  A  large  repair  expense  to  stock. 

3.  A  large  loss  on  "close  outs"  semiannually,  because 

the  cuttings  were  often  greatly  in  excess  of  sales, 
and  new  patterns  would  push  older  ones  out  of 
the  market. 

To  correct  these  conditions,  the  line  was  reduced  in 
variety  by  cutting  out  the  small  sellers ;  the  sales  department 
was  required  to  go  over  its  sales  records  on  the  remaining 
patterns,  and  from  them  prepare  a  statement  of  the  quantity 
it  would  agree  to  sell  of  each  pattern  each  month  for  the 
next  twelve  months;  and  the  factory  was  scheduled  to  pro- 
duce each  month  the  sales  department's  estimate  of  sales. 

As  a  result  of  these  changes,  75%  of  the  total  output 
went  right  to  the  shipping  room  instead  of  to  the  warehouse ; 
the  inventory  was  reduced  $55,000;  $20,000  repair  work  to 
stock  was  reduced  to  $4,000,  and  the  semiannual  "close 
outs"  were  entirely  eliminated.  The  whole  plan  amounted 
to  a  saving  of  about  $24,500  a  year  and  a  withdrawal  of 


24 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


$55,000  from  investment.  Furthermore,  the  value  of  the 
output  was  increased  23%,  with  the  same  pay-roll  and  equip- 
ment, by  properly  organizing  the  factory  to  handle  work  on 
the  new  lines. 

Many  other  instances  could  be  cited,  but  those  given  will 
suffice  to  show  how  the  industrial  engineer  is  developing 
his  profession,  and,  in  a  measure,  to  what  extent  he  has  al- 
ready obtained  results.  He  is  not  merely  a  systematizer. 
He  is  not  simply  an  accountant.  To  him,  these  things  are 
only  a  means  to  an  end.  He  analyzes,  standardizes,  organ- 
izes, and  unifies  the  workings  of  an  industry  in  its  entirety, 
in  his  effort  to  obtain  maximum  production  at  minimum 
cost  and  with  minimum  investment.  He  might  well  be 
called  "an  industrial  pilot  to  captains  of  industry/' 


CHAPTER    II 

ANALYZING   AN    INDUSTRIAL   MANAGER'S 
MONTHLY    BALANCE    SHEET 

An  analytical  treatment,  demonstrating  by 
figures  what  Unified  Accounting  does  and 
its  value  as  a  controlling  medium  in  connec- 
tion with  finances,  inventories,  investments, 
sales,  purchases,  expenses,  overheads,  produc- 
tion and  organization,  together  with  the  rela- 
tion of  these  to  one  another. 


CHAPTER    II 

ANALYZING   AN    INDUSTRIAL   MANAGER'S 
MONTHLY    BALANCE    SHEET 


The  Work  of  a  Manager 

An  industrial  manager,  \n  undertaking  to  accomplish 
certain  results,  should  shape  his  organization  to  that  end, 
assign  the  work  to  be  done  to  the  various  department  heads, 
and  then,  himself,  supervise  their  handling  of  detail.  That 
is  the  whole  story  in  a  nutshell,  as  to  what  the  work  of  a 
manager  ought  to  be. 

But  a  manager  may  have  all  the  intellectual  power 
imaginable,  and  yet,  lacking  the  absolute  facts  with  which 
to  supervise  his  work,  he  is  likely  to  become  the  slave  of  his 
organization,  instead  of  its  master.  His  departments  will 
run  him,  instead  of  being  run  by  him.  The  ship  will  have 
twenty  captains,  instead  of  one,  and  it  will  be  impossible 
for  him  to  steer  a  definite  course  to  success. 

To  supervise  intelligently,  he  must  have  facts — absolute 
facts — concerning  the  operations  of  his  business,  at  all  points. 
Verbal  information  is  unreliable  and  always  incomplete. 
Special  reports  are  frequently  misleading.  If  he  depends 
upon  this  kind  of  information  to  guide  him  in  his  supervi- 
sion, he  is  at  the  mercy  of  various  department  heads,  and 
must  not  only  sacrifice  most  of  his  prestige,  but  will  fail  in 
producing  many  possible  economies,  and  will  usually  pile 
up  inventories  instead  of  dividends. 

To  direct  with  certainty,  he  must  be  able  to  judge  the 

27 


28         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

work  of  others  not  by  intentions,  promises,  and  excuses, 
but  by  cold,  hard  facts,  as  shown  by  some  comprehensive 
method  of  measuring  the  results  obtained  by  those  to  whom 
he  has  assigned  the  work. 

Purposes  of  Unified  Methods  of  Accounting 

The  unified  methods  of  accounting  which  are  here  pre- 
sented are  intended  to  furnish  an  accurate  instrument  for 
measuring  results,  in  the  form  of  a  detailed  accounting 
system  fitted  to  every  element  in  a  business,  and  governed 
by  a  set  of  controlling  accounts.  The  installation  and  opera- 
tion of  such  a  system  is  usually  no  more  expensive  than 
the  fragmentary  systems  used  in  most  factories  today;  yet 
the  resulting  benefits  will  easily  be  recognized  by  any  manu- 
facturer who  will  carefully  study  and  apply  the  principles 
discussed. 

There  have  been  many  different  accounting  systems  con- 
structed for  manufacturing  concerns,  some  of  which  are  so 
elaborate  and  expensive  as  to  be  burdensome  and  top  heavy, 
simply  because  they  compile  regularly  much  information 
that  is  never  used  by  anyone.  By  these  unified  methods, 
however,  it  is  often  possible  to  trim  them  down  to  a  practical 
system  of  accounting  without  sacrificing  the  good  they  may 
have  accomplished  and  without  destroying  the  comparability 
of  the  data. 

What  is  required  of  any  accounting  system  is  certain, 
definite  information,  every  bit  of  which  is  usable  and  used, 
which  is  founded  on  basic  principles,  and  all  of  which  is  so 
unified  that  every  fact  it  presents  is  related  to  a  common 
whole. 

The  Monthly  Balance  Sheet 

Any  manager  who  is  giving  serious  thought  to  the 
success  of  his  business  desires  first  of  all  to  know  those 


ANALYZING  A  MANAGER'S    BALANCE   SHEET 


29 


factors  which  control  not  only  the  business,  but  the  personnel 
of  his  organization  as  well.  Nothing  will  give  him  this  as 
well  as  an  analytical  monthly  balance  sheet. 

The  manager  of  any  large  manufacturing  concern  should 
no  more  undertake  to  run  his  business  without  a  statistical 
monthly  balance  sheet,  than  should  a  superintendent  under- 
take to  make  an  automobile  without  detail  drawings. 

The  balance  sheets  of  many  manufacturing  concerns  ap- 
pertain to  little  more  than  commercial  transactions.  Usually, 
where  a  cost  system  has  been  developed,  bookkeeping  is 
one  thing,  cost  accounting  is  another,  while  production  is 
treated  as  an  incident  in  so  far  as  accounting  is  concerned, 
and  often  anything  like  accurate  information  about  the  busi- 
ness as  a  whole  is  obtained  but  once  a  year. 

The  author  has  devoted  much  time  and  study  to  perfect 
a  unified  method  of  accounting  for  industrials  which  should 
be  to  the  manager  of  a  manufacturing  concern  what  detail 
drawings  are  to  a  superintendent,  i.e.,  something  definite  to 
work  from,  and  he  takes  pleasure  in  presenting  the  results 
of  his  labor  in  the  form  of  a  complete  set  of  balance  sheets 
(Form  1)  worked  out  in  detail,  showing  an  entirely  new 
arrangement  of  accounting,  as  obtained  by  unified  methods, 
especially  as  regards  factory  operations  and  production. 
These  sheets  represent  a  unification  of  all  cost  accounting, 
bookkeeping,  and  general  accounting  into  one  set  of  con- 
trolling accounts,  and  give  in  addition  the  complete  in- 
ventories of  production  as  well  as  the  costs  of  production. 

In  other  words,  if  a  factory  purchases  so  much  material, 
labor,  and  expense  each  month,  the  accounting  system  must 
render  an  inventoried  balance  of  these  items,  and  this  in 
turn  must  be  balanced  with  the  controlling  accounts.  By 
controlling  accounts  is  meant  a  set  of  accounts  that  will  give 
certain  balances  in  connection  with  a  business  entirely  inde- 
pendent of  accounts  as  carried  in  current  ledgers;  in  other 


30 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


words,  the  balances  which  constitute  controlling  accounts 
are  obtained  from  one  source  and  compared  against  corre- 
sponding amounts  from  the  routine  accounting  work  of 
various  departments.  In  this  way,  an  absolute  check  on  the 
accounting  work  is  obtained,  as  well  as  a  control  over  the 
various  activities  of  the  organization. 

These  balance  sheets  should  be  completed  and  in  a 
manager's  hands  not  later  than  the  eighth  of  each  month 
for  the  month  previous.  During  the  month  a  ^'General 
Manager's  Daily  Digest"  is  used,  which  furnishes  informa- 
tion on  sales,  shipments,  finances,  purchases,  labor,  and 
schedules  in  such  a  way  that  these  balance  sheets  in  part 
are  a  monthly  summary  of  the  items  appearing  on  the  *'Daily 
Digest"  sheet.     (See  Form  2.) 

These  balance  sheets  show  in  detail  not  only  what  has 
taken  place  in  the  business  for  the  month,  but  also  gives 
comparisons  from  the  month  previous  and  cumulative  statis- 
tics down  to  date  for  the  year.  They  also  show  comparisons 
of  the  present  year  with  the  year  previous  on  the  same  dates. 
Further,  the  classification  and  statistical  comparison  as  a 
whole  are  such  as  will  not  only  give  any  manager  an  oppor- 
tunity to  take  immediate  action  in  planning  for  the  future, 
but  at  the  same  time  will  give  him  control  of  the  organization 
under  his  charge,  as  will  be  shown  in  the  general  analysis. 

In  analyzing  the  balance  sheets  shown  in  Form  1  as  they 
should  be  analyzed  by  the  manager  of  the  company,  it 
is  necessary  to  study  them  from  three  different  points  of 
view ;  first,  from  that  of  the  financier ;  second,  from  that  of 
the  executive;  and  third,  from  that  of  the  manufacturer. 

Analyzing  the  Balance  Sheet — From  the  Standpoint  of  the 
Financier 

Under  this  caption  there  are  four  prime  factors  of  suc- 
cessful operation  to  be  considered : 


i 


ANALYZING  A  MANAGER'S   BALANCE   SHEET 


31 


1.  The  solvency  of  the  company,  determined  by  a  com- 

parison of  its  assets  with  its  liabilities,  giving  due 
consideration  to  the  character  of  same. 

2.  Its  earning  capacity,  determined  by  comparing  its 

total  sales  against  gross  and  net  profits. 

3.  Its  earnings  as  compared  with  the  investments  made. 

4.  The  handling  of  the  business  as  a  whole. 

It  will  be  noted  in  the  balance  sheet  shown  in  Form  1,* 
that  current  assets  total  $197,924.10;  that  the  inventory  of 
materials  and  merchandise  amounts  to  $283,563.70.  This 
is  as  far  as  the  financier  can  go,  because  these  two  totals 
constitute  all  of  the  quick  assets,  which  amount  to  $481,- 
487.80.  Against  this  there  are  total  current  liabilities  of 
$170,685.78.  In  other  words,  there  is  $310,802.02  more 
in  quick  assets  than  there  is  in  current  liabilities.  A  busi- 
ness of  this  nature  would  be  entitled  to  carry  liabilities  to 
the  extent  of  at  least  one-half  of  its  total  quick  assets ;  there- 
fore, there  is  still  a  borrowing  capacity  of  not  less  than 
$70,000. 

The  profit  and  loss  account  shows  that  there  was  a  net 
profit  of  $14,955.63  for  January,  1917,  and  that  the  net 
profits  for  eight  months  have  been  $72,855  which,  on  the 
total  volume  of  sales  for  eight  months  ($785,804.75),  equals 
9.2%.  Therefore,  the  business  as  a  going  concern  is  in  a 
very  healthy  condition,  especially  in  view  of  the  fact  that 
the  net  increase  in  sales  for  the  current  month  has  been 
$42,745.14. 

The  total  assets,  including  investment  in  the  business, 
are  $859,643.16.  The  net  profits  for  eight  months  having 
been  $72,855,  the  business  is  paying  at  the  rate  of  about 
13%  per  annum  on  the  investments,  which  is  very  satisfac- 
tory. 

been'^ten  in'ro'und^n^X'rs!'''"'  "^''''  °^  *^'  '"^°''"*'  ^"  '^''  discussion  have 


i 


32         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Conservatism  is  shown  in  the  management  of  the  busi- 
ness by  the  fact  that  depreciation  is  charged  into  costs 
monthly,  and  that  accrued  dividends  on  preferred  stock  are 
not  carried  in  Profit  and  Loss  Account,  General ;  so  that, 
after  deducting  dividends  on  preferred  stock,  the  $63,532.72 
earnings  in  eight  months  are  free  to  be  applied  as  a  dividend 
on  common  stock  and  for  surplus,  according  to  the  decision 

of  the  directors. 

Accounts  receivable  have  increased  only  $20,000  on  an 
increased  sale  of  $42,000,  which  indicates  a  healthy  cash 
market.  Again,  current  assets  have  increased  by  over 
$13,000,  while  current  liabilities  have  decreased  by  $6,000. 
Accounts  payable  have  increased  only  $12,000  as  against 
an  increase  of  $23,000  in  general  stores,  all  of  which  goes 
to  show  a  strong  tendency  to  discount  purchases. 

That  finances  are  being  well  handled  is  evidenced  by 
the  fact  that  for  the  eight  months  cash  discounts  and  interest 
received  have  amounted  to  $14,196.60;  furthermore,  the 
expense  in  the  offi.ce,  covering  all  accounting  work,  has 
amounted  to  but  $21,098.63  for  the  same  period  of  time.  In 
other  words,  the  accounting  department  has  earned  about 
66^%  of  its  own  expense,  or  22%  of  the  entire  general 
commercial  expense;  therefore,  to  a  banker,  the  entire 
condition  of  the  business  would  be  most  satisfactory  in  every 
way,  and  one  in  which  there  would  be  no  question  concern- 
ing a  loan  of  $70,000  or  $100,000  if  for  any  reason  it  were 
required;  and  if  the  present  volume  of  sales  were  to  keep 
up,  an  increased  investment,  either  of  a  temporary  or 
permanent  kind,  would  probably  soon  become  necessary. 

Analyzing  the  Balance  Sheet— From  the  Standpoint  of  the 
Executive 
When  a  manager  creates  an  organization  around  him, 
he  should  not,  as  is  too  often  the  case,  assume  the  responsi- 


ANALYZING  A  MANAGER'S   BALANCE   SHEET 


33 


bilities  of  his  various  department  heads,  or  do  their  work 
for  them,  but  should  throw  the  whole  responsibility  on  them 
and  then  judge  them  altogether  by  results.  If  the  results 
are  not  satisfactory,  he  should  immediately  make  changes 
in  his  organization  and  get  men  big  enough  for  the  positions. 
To  be  able  to  work  on  these  lines  he  must  have  a  set  of 
controlling  accounts  that  control  not  only  the  finances  and 
investments  of  his  business,  but  his  organization  as  well. 
What  is  meant  by  this  is  illustrated  in  the  following  briel 
analysis : 

The  manager  would  first  check  up  the  cashier's  depart- 
ment by  asking  for  the  bank  balances  at  the  terminating 
period  of  the  balance  sheets.  If  they  check  with  cash  on 
hand  of  $25,070.20,  all  is  well. 

He  w^ould  then  ask  the  billing  department  for  the  balance 
of  accounts  receivable  as  shown  on  the  customers  ledger, 
which  must  check  the  controlling  account  of  $120,172.80. 
If  their  balances  agree,  their  work  is  correct.  If  not,  they 
are  in  error  and  they  must  locate  the  discrepancy. 

The  bookkeeping  department  is  then  called  upon  for  the 
current  accounts  payable,  which  must  check  the  controlling 
account  of  $109,627.68.  If  it  does  not,  they  are  again  in 
error  and  must  locate  the  discrepancy. 

Next,  the  same  inquiry  applies  to  general  stores  inven- 
tory. The  stores  ledgers  must  check  the  controlling  account 
of  $112,490,  and  so  on  for  all  important  accounts  con- 
stituting liabilities  and  assets  as  shown  on  the  balance 
sheets. 

After  the  heads  of  these  particular  departments  have 
been  found  in  error  two  or  three  times  by  a  manager,  the 
moral  influence  that  these  controlling  accounts  have  over 
them  is  far-reaching,  as  it  not  only  compels  them  to  do  their 
work  right,  but  keeps  them  from  defalcation  of  any  kind. 
This  in  itself  is  worth  many  times  what  it  costs  to  get 


34 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


information  in  this  form,  as  it  in  a  way  really  constitutes  a 
self-auditing  system. 

Reviewing  further,  as  an  executive,  the  work  of  the 
organization  as  revealed  by  the  balance  sheet,  the  next  con- 
sideration is  the  collection  department.  From  this  must  be 
obtained  an  explanation  as  to  why  accounts  receivable  past 
due  have  been  allowed  to  increase  $7,314  or  a  little  over 
S0%,  as  shown  on  the  balance  sheet;  and  also  why  notes 
receivable  have  been  allowed  to  increase  $512.25.  In  the 
collection  of  these  accounts,  however,  it  is  to  be  observed 
that  accounts  receivable,  consigned,  have  decreased  over 
$7,000.  This,  however,  reflects  a  credit  on  the  sales  de- 
partment rather  than  the  collection  department. 

At  first  glance  the  condition  in  the  purchasing  depart- 
ment is  not  altogether  satisfactory,  inasmuch  as  general 
stores  have  increased  $23,000,  while  factory  production  has 
had  a  slight  decrease  in  its  use  of  general  stores.  This  re- 
quires information  from  the  stores  department  as  to  what 
the  items  are  that  have  caused  an  increase  of  25%  in  the 
general  stores  inventory,  and  an  explanation  from  the  pur- 
chasing agent.  Nominally,  the  general  stores  inventory 
should  not  be  over  60  days*  factory  requirements,  as  most 
materials  can  be  obtained  in  less  time  than  this  from  the 
market.  The  production  sheet  shows  that  $45,000  worth 
of  general  stores  were  used  for  the  month,  which  would 
make  a  maximum  inventory  of  $90,000 ;  whereas  the  inven- 
tory is  seen  to  be  $112,490,  or  $22,490  too  much.  The 
decrease  in  inventory  on  work  in  progress,  semi-finished 
stores,  and  finished  stores,  will  be  taken  up  from  another 
point  of  view. 

From  investment  under  assets,  it  appears  that  better- 
ments have  taken  place  this  month  to  the  extent  of  $5,442.90. 
Further,  the  factory  production  sheet  shows  that  better- 
ments have  been  made  for  the  eight  months  to  the  extent 


ANALYZING   A   MANAGER'S    BALANCE   SHEET 


35 


of  $22,780.  From  a  knowledge  of  factory  conditions,  this 
seems  excessive  for  the  current  month.  Therefore,  the  office 
manager  must  give  an  explanation  as  to  why  it  has  been 
necessary  to  expend  $1,100  for  office  furniture  and  fittings 
during  the  current  month,  which  is  apparently  an  excessive 
amount.  Next,  the  superintendent  is  asked  for  an  explana- 
tion as  to  why  it  has  been  necessary  to  spend  $4,342.90  for 
machinery  and  tools,  dies  and  jigs,  etc.,  during  the  current 
month. 

While  it  is  true  that  both  the  office  manager  and  the 
superintendent  have  an  absolutely  free  hand  in  making  ex- 
penditures, it  is  also  true  that  they  are  answerable  for 
exactly  what  they  do  every  thirty  days,  and  after  men  have 
been  under  such  management  as  this  for  a  few  months,  they 
think  out  their  problems  with  a  great  deal  of  care  before 
they  make  purchases  of  any  character. 

From  the  profit  and  loss  sheet  analysis,  the  sales  depart- 
ment is  to  be  complimented,  inasmuch  as  its  net  sales 
have  increased  $42,745.14  for  the  month;  especially  is  this 
so  after  looking  at  the  analysis  of  commercial  expense,  for 
while  sales  have  increased  42%,  selling  expense  has  only 
increased  14%  over  the  previous  month.  There  is  one 
thing,  however,  to  see  the  sales  manager  about  immediately, 
and  that  is  the  fact  that  sales  have  increased  $34,762,  or 
400%,  on  one  model,  while  they  have  been  reduced  by  over 
$20,000  on  another,  which  is  evidence  that  one  model  of 
machine  is  taking  the  place  of  another  in  the  market.  If 
this  is  so,  manufacturing  conditions  must  be  immediately 
adjusted  accordingly;  therefore,  a  complete  explanation  of 
the  means  which  have  been  adopted  to  increase  the  sales 
on  this  particular  model  is  demanded.  This  will  probably 
enable  the  manager  to  judge  whether  it  is  a  permanent  or 
temporary  increase  and  whether  it  is  local  or  general  in  its 
territorial  expansion. 


36 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


The  whole  commercial  analysis  of  the  business,  with 
some  few  exceptions,  shows  it  to  be  fairly  satisfactory  from 
an  executive  point  of  view,  especially  in  view  of  the  small 
net  increase  of  $1,257.50  on  total  commercial  expense  as 
compared  with  the  total  increase  in  sales.  The  only  other 
point  in  this  connection  would  be  to  take  up  with  the  adver- 
tising manager  the  total  monthly  advertising  of  $4,168.90, 
which  could  possibly  be  reduced  for  a  while,  in  view  of  the 
increased  sales. 

The  average  yearly  percentage  of  commercial  expense 
to  sales  is  15%.  Therefore,  12.1%  is  extremely  satisfactory 
and  shows  that  this  percentage  has  been  reduced  during 
the  current  month  by  4.3%  over  the  previous  month. 


Analyzing  the  Balance  Sheet — From  the  Standpoint  of  the 
Manufacturer 

There  are  very  few  manufacturers  today  who  know 
what  production  they  ought  to  get  from  their  factories,  what 
they  are  getting,  or  in  what  shape  they  are  getting  it.  In 
other  w^ords,  they  have  no  definite  control  over  the  opera- 
tions of  the  most  important  thing  they  have  to  deal  with, 
i.e.,  their  investment  in  plant,  material,  and  labor.  This  is 
what  a  unified  accounting  system  provides  for,  so  in  the 
present  instance  there  is  a  long  session  to  be  held  with  the 
superintendent. 

The  total  production  for  the  month  is  $110,800.57,  or 
$939.37  less  than  it  was  the  previous  month,  notwithstand- 
ing the  fact  that  productive  labor  has  been  increased  by 
$3,218,  as  shown  on  the  factory  production  sheet,  and  over- 
head, by  $2,101.85,  as  shown  by  the  increased  non-produc- 
tive labor  ($1,610)  and  non-productive  materials  ($491.85) 
on  the  factory  overhead  sheet. 

The  decrease  of  $290  in  general  stores  and  of  $6,441  in 
semi-finished  stores  would  seem  to  show  that  the  produc- 


ANALYZING  A  MANAGER'S   BALANCE   SHEET 


37 


tion  for  the  month  has  been  obtained  by  an  abnormal  in- 
crease in  labor  on  the  work.  By  analyzing  a  little  further, 
it  will  be  seen  that  while  the  factory  used  $27,221  in  semi- 
finished stores,  it  only  delivered  back  to  semi-finished  stores 
$21,200,  and  that  out  of  the  total  production  $5,442  was 
charged  to  betterments. 

The  net  increase  in  total  production,  finished,  however, 
was  $16,188.  This  could  only  have  been  obtained,  in  this 
case,  by  reducing  a  previous  inventory  which  had  already 
had  much  labor  applied  to  it,  inasmuch  as  the  previous  work 
in  progress  was  $64,000,  while  the  net  work  in  progress  for 
the  current  month  is  only  $47,000.  "Assets — Inventory" 
shows  that  work  in  progress  was  reduced  $17,127.55,  semi- 
finished stores  $13,021.25,  and  finished  stores  $1,814.38; 
or  a  total  of  $31,963.18,  which  is  exactly  the  amount  neces- 
sary to  make  the  increased  sales  of  $42,745,  the  cost  of  which 
is  shown  to  be  $31,963.18. 

This  means  that  while  the  factory  has  delivered  enough 
to  meet  sales  requirements  for  the  current  month,  it  has 
drawn  down  inventories  on  work  previously  done  to  the 
extent  of  over  $31,000,  and  consequently  is  that  much 
behind  sales  in  its  production  for  the  month.  Therefore, 
for  the  coming  month  under  present  sales  conditions,  the 
factory  would  fall  behind  in  its  deliveries  by  something  like 
$50,000,  except  for  the  fact  that,  as  shown  under  assets, 
there  is  $47,000  work  in  progress,  $67,000  worth  of  semi- 
finished stores,  and  $56,000  of  finished  stores  to  draw  upon. 

It  will  not  do,  however,  to  reduce  these  inventories,  as 
they  are  not  even  normal  as  it  is.  $56,000  represents  only 
about  12  days'  shipping  requirements,  while  the  inventory 
ought  never  to  be  less  than  30  days'  requirements.  Semi- 
finished stores  of  $67,000  represent  only  a  production  of  a 
little  over  60  days,  as  during  the  current  month  $27,000 
was  used  in  the  factory  and  $7,000  was  sold  in  parts,  while 


38         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

work  in  progress  is  low  by  about  $17,000;  therefore,  the 
condition  of  the  whole  factory  has  to  be  keyed  up,  as  the 
inventories  are  all  out  of  balance  in  their  relation  to  one 
another. 

To  do  this,  the  factory  must  be  re-scheduled ;  more  labor 
must  be  put  into  the  departments  of  first  operation;  and 
next  month's  balance  sheet  ought  to  show  an  increase  in 
the  use  of  general  stores  of  at  least  $20,000  or  $25,000,  in 
order  to  get  work  coming  through  the  factory  fast  enough. 
Therefore,  in  view  of  this  situation,  it  is  fortunate  that 
general  stores  inventory  has  been  increased  during  the 
present  month  by  $23,000. 

The  factory  overhead  for  the  month  shows  80.27%, 
which  is  a  reduction  of  1.52%  for  the  month  previous;  and 
so  far  as  this  goes,  it  is  very  satisfactory.  There  are  also 
a  large  number  of  similar  details  in  connection  with  this 
balance  sheet  that  could  be  analyzed,  such  as  the  percentage 
of  profits  on  the  different  items  sold,  the  percentage  relation 
between  depreciation  and  repairs,  the  various  ratios  between 
non-productive  and  productive  elements,  etc.,  etc. 

Availability  and  Value  of  Unified  Balance  Sheet 

It  should  be  explained  that  both  in  principle  and  detail 
these  unified  methods  of  accounting  can  be  applied  to  any 
kind  of  manufacturing  business,  according  to  its  own  par- 
ticular requirements.  No  matter  what  a  concern  manu- 
factures, it  can  only  use  labor,  material,  and  expense  as 
processing  factors,  and  can  only  buy  and  sell  as  commercial 
factors;  and  the  principles  laid  down  apply.  If  necessary, 
inventories  can  always  be  divided  up  into  more  or  less 
numerous  accounts;  as  can  also  labor  and  material  or  ex- 
pense of  any  kind ;  in  other  words,  we  can  take  the  prime 
totals  of  assets,  such  as  current,  inventory,  and  investment, 
and  divide  them  up  into  any  classification  that  may  be  re- 


ANALYZING  A  MANAGER'S   BALANCE   SHEET 


39 


quired.  The  same  may  be  said  of  liabilities,  also  revenue 
and  costs  of  revenue,  and  so  on  for  the  other  various  divi- 
sions that  have  totals. 

The  value  of  these  balance  sheets  is  also  greatly  increased 
where  data  from  the  previous  year  are  filled  in,  as  provided 
for  in  the  last  column,  for  a  comparison  of  contractions  or 
expansions  in  volume  can  then  be  made  on  a  long  range 
basis.  Sufficient  has  been  said  to  show  the  purpose  of  these 
accounting  methods,  their  scope,  and  also  their  value  to  any 
executive  who  wants  to  manage  a  business  on  anything 
like  a  scientific  basis  and  keep  right  up  to  the  minute  in  his 
work. 

If  any  manufacturer  will  give  the  time  to  analyze  his 
own  business  in  the  manner  indicated,  it  will  not  take  him 
long  to  determine  the  invaluable  assistance  such  accounting 
methods  can  afford  him;  and  the  feeling  of  security  he 
would  have  in  handling  his  business  by  reason  of  being  in 
absolute  control  of  it,  justifies  many  times  over  the  expense 
and  trouble  incident  to  their  installation. 


Manager's  Daily  Report 

Nothing  is  of  more  value  to  a  manager  than  a  daily 
report  showing  the  relative  value  of  sales  and  shipments, 
and  in  addition,  finances,  bank  balances,  and  such  other 
general  information  regarding  agencies,  number  of  em- 
ployees, etc.,  as  may  be  necessary  to  him.  Such  a  report  is 
given  in  Form  2,  which  will  at  least  offer  a  suggestion  to 
any  manager  for  developing  a  report  of  this  character  for 
any  particular  business. 

The  arrangement  of  the  items  under  sales  and  shipments 
should  be  made  to  correspond  practically  with  the  same 
items  as  shown  on  the  monthly  balance  sheet,  which  in 
reality  are  a  recapitulation  of  a  general  sales  analysis  made 
at  the  end  of  the  month. 


40 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Further  information  can  be  supplied  on  this  report, 
such  as  any  outstanding  obligations  in  the  shape  of  purchase 
orders,  together  with  such  data  as  "purchases  made"  of 
different  commodities  each  day.  Other  items  will  suggest 
themselves  to  any  manager  according  to  his  needs  for 
information. 


CHAPTER    III 

PURCHASING  AND   RECEIVING 


A  method  for  making  purchases  and  follow- 
ing them  up — the  recording  and  checking  of 
all  such  transactions,  and  the  receiving  and 
checking  of  the  goods  purchased. 


CHAPTER    III 

PURCHASING   AND    RECEIVING 

Work  of  the  Purchasing  Department 

While  this  chapter  confines  itself  principally  to  the 
specifications  and  forms  required  to  make  purchases,  refer- 
ence is  made  in  several  instances  to  a  stores  keeper  and 
stores  recorder,  simply  to  show  the  relation  between  the 
purchasing  agent  and  stores,  and  to  evidence  the  fact  that 
any  organization  must  be  so  worked  out  that  the  general 
stores  keeper  may  be  responsible  solely  to  the  purchasing 
department : 

1.  For  the   receiving  and  checking  of  all  materials 

against  original  purchase  orders,  in  such  manner 
that  all  purchases  can  be  checked  before  being 
recorded  on  stores  ledgers. 

2.  For  the  physical  storage  of  materials  and  the  de- 

livery of  same  to  the  factory  at  either  the  store- 
rooms or  the  factory  departments,  as  may  best 
conform  to  the  factory  requirements. 


Purchase  Specifications 

To  make  intelligent  and  satisfactory  purchases,  a  pur- 
chasing department  should  be  guided  and  directed  in  every 
instance  by  specifications,  as  to  both  quantity  and  quality, 
for  everything  that  is  to  be  bought.  Therefore,  it  is  per- 
tinent to  take  up  at  this  point  the  following  facts : 

If  a  schedule  for  the  making  of  goods  to  be  sold  has 

43 


44 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


been  authorized,  it  should  cany  with  it  authorization  to 
purchase  the  material,  labor,  and  expense  necessary  for  its 
completion. 

If  a  betterment  or  repair  order  has  been  authorized,  the 
same  rule  applies;  and  if  office,  operating,  and  factory  sup- 
plies have  been  covered  by  a  maximum  and  minimum 
amount  for  stores,  this  should  be  a  standing  authorization 
for  purchase  up  to  the  maximum  amounts.  In  this  way 
the  manager  is  relieved  from  the  tremendous  amount  of 
detail  incident  to  passing  on  every  requisition  for  purchase. 
Therefore,  a  production  department  should  prepare  and 
furnish  to  the  purchasing  department  detailed  specifications 
as  to  quantity  and  quality  of  material  required  for  goods  to 
be  manufactured  for  sale. 

On  all  betterment  and  repair  orders  which  have  been 
O  K'd  by  a  manager,  whether  for  the  benefit  of  the  produc- 
tion department,  factory  superintendent,  or  any  other  de- 
partment head,  specifications  for  quantity  and  quality  of 
material  should  be  furnished  by  the  originator  of  the  requisi- 
tion, but  perhaps  should  not  in  all  instances  be  prepared  by 
him. 

On  all  operating  and  general  supplies,  so  far  as 
practicable,  standard  specifications  should  be  furnished  the 
purchasing  department  by  the  factory  or  engineering, 
laboratories. 


Purchase  Requisition 

Purchase  requisitions  prepared  by  people  absolutely 
familiar  with  what  is  required  as  regards  kinds,  quantities, 
dimensions,  times  of  delivery,  etc.,  give  the  purchasing 
department  an  opportunity  to  devote  all  of  its  time  to  the 
buying  and  getting  in  of  material  on  the  dates  required. 

Purchase  requisitions  should  be  made  out  in  triplicate 
at  least,  one  copy  on  white  paper  for  the  originator  of  the 


PURCHASING    AND    RECEIVING 


45 


requisition;  one  copy  on  yellow  paper  for  the  purchasing 
agent ;  and  one  copy  on  pink  paper  for  the  stores  recorder. 
(See  Form  3.) 

When  the  stores  keeper  has  need  of  materials,  either  to 
cover  schedule  requirements,  to  bring  his  stock  above 
minimum,  or  because  of  a  general  stores  requisition  for 
which  he  cannot  supply  the  material,  he  should  make  out  a 
purchase  requisition,  send  yellow  and  pink  copies  to  the 
stores  recorder,  and  keep  the  white  copy  himself  until  the 
goods  are  received.  The  stores  recorder  will  check  the 
requisition  with  the  stores  ledgers,  fill  in  the  additional  data 
required,  keep  pink  copy,  and  send  yellow  copy  to  the  pur- 
chasing agent  for  execution. 

In  case  the  superintendent,  or  any  other  person  author- 
ized to  do  so,  requires  material  which  must  be  purchased, 
he  may  make  out  a  purchase  requisition,  holding  white  copy, 
and  send  yellow  and  pink  sheets  to  the  stores  recorder  who 
will  check  as  above  and  forward  yellow  copy  to  purchasing 
agent. 

This  procedure  applies  to  anything  which  is  to  be  pur- 
chased, whether  for  a  production,  betterment,  or  repair 
order,  or  for  general  or  special  supplies,  as  in  this  case  the 
unit  of  organization  for  handling  materials  is  complete. 
There  are,  however,  in  very  large  plants  or  where  several 
plants  are  controlled  from  one  central  office,  reasons  why  a 
separate  order  department  should  be  established  to  handle 
all  planning  and  specification  work  and  to  control  all  pur- 
chase orders,  but  they  are  the  exception,  not  the  rule ;  90% 
of  all  industrials  should  be  organized  along  the  lines  cited 
above. 

The  manager,  superintendent,  or  an  order  department, 
should  O  K  all  purchase  requisitions  for  manufacturing  or 
operating  supplies  not  covered  by  maximum  and  minimum 
amounts,    and    for   all   materials    required    in   excess    of 


46         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

authorized  scheduled  quantities.  Requisitions  for  all  office 
supplies,  printed  matter,  and  catalogues  should  be  O  K'd 
by  the  manager,  as  should  also  all  original  contracts  cover- 
ing schedule  requirements. 

The  purchase  requisition  must  in  every  case  be  checked 
by  the  stores  recorder  before  going  to  the  purchasing  agent, 
so  that  material  on  hand  can  be  checked  and  utilized,  or  sub- 
stitution made  if  possible.     He  should  fill  in  on  the  pur- 
chase requisition  (Form  3)  the  ''Quantity  on  Hand,"  the 
"Quantity  on  Order,"  net  "Quantity  to  Buy,"  and  "Descrip- 
tion of  Item — or  Symbol"  (symbol  to  be  given  if  used)  ; 
also  giving  "Last  Price,"  which  he  obtains  from  his  stores 
ledger.     This  furnishes  the  purchasing  agent  with  full  in- 
formation as  to  requirements  and  facilitates  the  placing  of 
purchase  orders.    The  purchasing  agent  should  be  furnished 
by  the  production  department  with  all  data  relative  to  manu- 
facturing schedules,  in  ample  time  for  him  to  do  the  neces- 
sary shopping  around  and  contracting. 

From  the  foregoing  it  is  apparent  that  absolutely  nothing 
should  be  ordered  directly  by  the  superintendent  or  by  heads 
of  departments;  that  all  purchase  requisitions  must  be 
checked  by  the  stores  recorder;  and  that  the  stores  keeper 
and  stores  recorder  must  assume  full  responsibility  for 
goods  bought  and  for  their  distribution  to  some  other  form 
of  inventory. 

In  this  connection  it  must  be  borne  in  mind  that  the 
general  stores  keeper  is  nothing  more  or  less  than  a  custodian 
of  the  company's  property  and  that  he  is  accountable  for  its 
disposition  just  as  much  as  a  cashier  or  comptroller  is 
responsible  for  the  disposition  of  money  intrusted  to  his 
custody,  and  that  a  proper  system  of  handling  general  ac- 
counts for  the  company  calls  for  just  as  close  recording  work 
on  stores-keeping  as  it  does  for  actual  money.  Therefore, 
no  matter  by  whom  this  purchase  requisition  is  made  out, 


PURCHASING    AND    RECEIVING 


47 


it  must  first  be  handed  to  the  stores  recorder  who  will  check 
it  with  the  general  stores  ledger  to  determine  whether  he 
has,  or  has  not,  any  of  the  goods  required  on  hand  or  on 
order,  or  a  satisfactory  substitute;  then,  and  then  only, 
sending  it  to  the  purchasing  agent,  as  corrected  by  him,  to 
make  the  purchase.  This  will  not  only  prevent  overbuying, 
but  will  often  enable  substitution  of  material  to  be  made  for 
many  kinds  of  small  jobs. 

This  mode  of  procedure  gives  the  stores  keeper  and 
stores  recorder  absolute  control  of  the  quantities  and 
amounts  of  goods  that  are  on  hand,  whether  as  applied 
to  specific  requirements,  or  as  applied  to  maximum  and 
minimum  quantities  of  standard  materials. 

In  every  instance  possible,  the  full  information  called 
for  by  the  purchase  requisition  should  be  filled  in  for  the 
guidance  of  the  purchasing  agent,  as  it  will  save  a  vast 
amount  of  time,  both  in  letter-writing  and  telephone  work, 
when  making  purchases. 


Purchase  Order 

In  connection  with  the  purchase  requisition  (Form  3), 
the  purchasing  agent  must  be  provided  with  a  form  that 
will  constitute  a  contract  for  the  purchase,  as  open  order 
placing,  without  proposals  or  bids,  is  very  dangerous  and 
should  never  be  tolerated  except  in  an  extreme  emergency. 
To  meet  this  requirement  most  conveniently,  the  form  of 
the  purchase  order  should  be  specific  enough  in  its  arrange- 
ment and  detail  to  constitute  a  contract. 

A  contract  must  specify  quality,  quantity,  price,  time  of 
delivery  and  point  of  destination,  and  an  understanding  as 
to  transportation  charges.  But  few  purchase  orders  would 
seem  to  cover  these  points  as  a  regular  practice.  The  one 
Qlustrated  in  Form  4  does. 

The  purchase  order  should  be  made  out  in  several  copies. 


48         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

The  first  or  white  sheet  goes  to  the  vendor;  the  third 
sheet,  which  is  pink,  goes  to  the  stores  recorder ;  while  the 
second  sheet,  which  is  yellow,  is  held  by  the  purchasing  agent 
and  filed  by  him  with  the  yellow  copy  of  the  purchase  requisi- 
tion. The  fourth,  blue  sheet,  without  quantity  or  price,  will 
be  filed  by  the  receiving  clerk  from  which  to  check  descrip- 
tion of  materials  received  when  not  accompanied  by  memo- 
randum. By  this  color  scheme  the  distinction  of  each  sheet 
can  be  determined  at  sight.  Pink  sheets  for  either  requisi- 
tions or  purchase  orders  belong  to  the  stores  recorder  and 
yellow  sheets  belong  to  the  purchasing  agent.  Additional 
copies  of  the  purchase  order  may  be  supplied  the  production 
department  and  also  the  accounting  department  so  that 
invoices  as  they  come  in  may  be  numbered  and  checked. 

On  the  bottom  of  the  purchase  order  there  are  figures 
representing  dates,  from  1  to  31.  These  are  provided 
especially  for  reminder  purposes  to  facilitate  purchasing 
When  the  purchasing  agent  makes  a  purchase  which  he 
wishes  to  have  followed  up,  he  puts  a  check  mark  on  the 
date  on  which  he  expects  these  goods,  or  expects  to  hear  in 
regard  to  them,  and  also  a  pencil  figure  above  the  date 
denoting  the  month ;  thus,  if  a  purchase  was  made  on  the 
15th  day  of  the  6th  month  and  the  goods  were  not  expected 
for  60  days,  he  would  place  a  figure  8  over  the  figure  15  on 
the  purchase  order ;  or,  if  in  30  days  he  wanted  to  make 
inquiry,  he  would  in  addition  put  7  over  the  15. 

The  filing  clerk  makes  a  memorandum  of  this  order 
number  on  a  tickler  card  in  the  purchasing  agent's  tickler, 
so  that  on  the  date  checked  the  file  containing  the  order  and 
its  correspondence  will  be  handed  to  the  purchasing  agent 
for  his  attention.  This  makes  an  automatic  tickler  system 
in  connection  with  purchasing  that  does  away  with  the 
necessity  for  any  other  kind  of  follow-up  system.  Any 
further  information  required  for  follow-up  purposes  can, 


PURCHASING    AND    RECEIVING 


49 


of  course,  also  be  shown  on  these  same  tickler  cards.  All 
the  orders  or  data  required  to  be  brought  up  on  any  particu- 
lar date  will  be  put  on  one  card  and  this  card  will  be  filed 
ahead  imder  the  index  of  the  date  required.  (See  Form  5.) 
The  purchasing  agent  should  also  keep  a  perpetual  price 
file.  A  card  should  be  made  out  for  each  concern  from 
which  goods  are  bought  and  on  this  card  one  or  two  lines 
should  be  given  to  each  of  the  articles  purchased  from  them ; 
the  price  and  date  of  quotation  should  be  given  after  each 
article,  and  when  any  change  is  made  in  quotation,  this 
price  card  should  also  be  changed  showing  date  of  new- 
quotation.  In  this  way  the  purchasing  agent  has  always 
before  him  the  price  of  all  material  according  to  last  quota- 
tion. This  would  not  apply  to  special  items  bought  very 
infrequently. 

Material  Receipt  and  Notice 

Having  requisitioned  goods  and  provided  a  means  for 
purchasing  them,  the  next  step  is  to  receive  them  at  the 
factory.  Consequently,  for  the  receiving  department  a 
''Material  Receipt  and  Notice"  (Form  6)  has  been  provided 
as  the  first  step  toward  this  end.  All  receipts  of  whatever 
nature  should  be  checked,  counted,  weighed,  and  entered 
upon  this  receipt.  Under  no  circumstances  can  the  goods 
be  checked  from  the  original  invoice,  as  their  receipt  must 
be  invariably  entered  on  this  form. 

The  material  receipt  and  notice  should  be  made  out  in 
several  copies  but  must  conform  to  the  proper  color  scheme. 
The  following  represents  its  full  complement  and  disposi- 
tion: a  yellow  sheet,  which  is  to  be  given  to  the  purchas- 
ing agent ;  a  pink  sheet  for  the  stores  recorder ;  a  blue  sheet, 
together  with  the  goods,  for  the  stores  keeper ;  a  white  sheet, 
when  necessary,  to  the  production  department;  and  one 
sheet  to  be  retained  by  the  receiving  clerk  and  filed  in  alpha- 


CO         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

betical  order  under  the  name  of  the  concern  ordered  from. 
Upon  receipt  of  this  memorandum,  the  purchasing  agent 
should  immediately  send  out  to  the  stores  recorder  the 
original  invoice.  As  soon  as  the  stores  recorder  receives  the 
original  invoice  for  any  goods,  it  will  be  his  signal  to  bring 
together  all  four  papers  of  the  transaction  held  by  him,  viz : 

1.  Material  receipt  and  notice,  as  made  out  by  the  re- 

ceiving clerk  (pink  sheet). 

2.  The  triplicate  of  the  original   "Purchase  Order" 

(pink  sheet). 

3.  His  own  copy  of  the  purchase  requisition   (pink 

sheet). 

4.  The  invoice  from  the  dealer. 

This  method  leaves  absolutely  no  excuse  for  the  stores 
recorder's  not  getting  the  proper  count  and  record  of  all 
goods  received,  and  it  will  settle  all  questions  of  difference 
that  may  arise  as  to  quantity,  price,  etc.,  before  entry  is 
made  in  his  stores  ledgers ;  in  this  way  making  the  ledgers 
absolutely  reliable  for  the  items  which  they  cover. 

It  may  be  necessary  under  some  conditions,  such  as  an 
urgent  demand  for  material,  slow  arrival  of  material,  or 
non-arrival  of  invoices,  to  enter  goods  on  the  stores  record 
as  received  before  checking  with  the  invoice,  but  this  prac- 
tice should  not  be  followed  as  a  general  rule. 

The  purchasing  agent  should  impress  all  creditors  with 
the  fact  that  invoices  must  be  promptly  forwarded  so  that 
they  will  arrive  by  the  time  the  goods  do;  therefore,  on 
the  purchase  order  is  a  "Notice"  for  this  purpose  which 
reads,  ''All  goods  are  held  subject  to  your  order  until  we 
receive  an  invoice/'  This  means  that  no  goods  should  go 
into  stock  until  the  invoice  is  received,  so  that  in  case  of 
shortage  or  overage,  or  a  lack  of  specified  quality,  adjust- 
ments can  be  made  to  cover  any  consignment  before  it  loses 


PURCHASING    AND    RECEIVING 


SI 


its  identity  by  being  absorbed  into  stock  or  made  up  into 
product. 

Under  no  circumstances,  except  to  obtain  discounts  from 
reliable  firms,  should  payment  be  made  on  consignment  of 
goods  until  they  have  been  checked  as  indicated  above. 
After  this  checking  has  been  done,  the  purchase  requisition, 
the  copy  of  the  purchase  order,  and  the  invoice,  all  duly 
stamped  and  attested  by  the  stores  recorder  as  being  correct, 
should  be  immediately  sent  to  the  accounting  department  for 
audit  and  payment,  a  copy  of  "Material  Receipt  and  Notice" 
remaining  permanently  with  the  receiving  department. 

Filing  Purchase  Requisitions 

The  factory  may  have  requisitioned  something  the  stores 
keeper  did  not  have  on  hand;  if  so,  the  stores  keeper  will 
immediately  make  out  a  purchase  requisition,  attach  the 
general  stores  requisition  to  it,  and  file  in  a  temporary  file. 
When  the  copy  of  the  purchase  order  is  received  by  him, 
he  will  withdraw  from  the  file  the  purchase  requisition 
which  this  covers  and  file  them  together  alphabetically  under 
the  name  of  the  concern  ordered  from. 

As  soon  as  the  original  invoice  for  such  goods  has  been 
checked  and  entered  on  the  stores  ledger,  the  general  stores 
requisition  will  be  honored  and  properly  charged ;  while  the 
purchase  requisition,  copy  of  the  purchase  order,  and  ma- 
terial receipt  and  notice  will  be  attached  to  the  original 
invoice  and  forwarded  to  the  accounting  department. 

Filing  Purchase  Orders 

Vertical  filing  cabinets  should  be  provided  for  the  pur- 
chasing agent,  and  in  these  cabinets  all  purchase  orders  must 
be  filed  in  serial  order.  As  soon  as  a  purchase  order  is  made 
out,  a  file  must  be  started,  and  in  this  file  must  be  imme- 
diately placed  with  the  purchase  order,  the  purchase  requisi- 


52         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

tion ;  then  all  correspondence  relating  to  this  particular  pur- 
chase order  must  be  carried  in  the  same  file.  When  the 
goods  are  received,  the  file  must  also  contain  the  material 
receipt  and  notice;  or,  if  goods  are  rejected,  the  form  or 
letter  showing  material  rejected  must  be  placed  in  this  file, 
together  with  any  and  all  other  papers  incident  to  this  par- 
ticular purchase  order,  it  being  understood,  however,  that 
all  correspondence  and  papers  (including  quotations  on 
machinery  and  shop  equipment),  not  connected,  directly  or 
indirectly,  with  the  purchase  order,  are  to  be  filed  in  the 
regular  files  under  subject  indexing.  This  will  cover  the 
purchasing  order  files  both  by  number  and  by  alphabet  and 
in  this  way  a  central  filing  and  mailing  department  can  be 

established. 

The  purchasing  agent  should  have  a  small  set  of  cards 

one  card  for  each  different  firm,  from  whom  the  company 

buys  goods— on  which  will  appear  the  various  dates  and 
order  numbers  for  each  different  purchase  made  of  that  par- 
ticular firm.  For  instance,  the  card  headed  "Cleveland  Twist 
Drill  Co.''  might  have  on  it  6/30,  125 ;  7/5,  272 ;  7/10,  396 ; 
7/18,  987 ;  each  of  which  would  indicate  a  different  purchase 
order  number  and  its  date.  By  referring  to  the  cards  of 
this  concern,  all  the  papers  from  the  "Qeveland  Twist  Drill 
Company"  can  be  obtained  relative  to  any  purchases  made 
from  them.    (See  Form  7.) 

Purchase  orders  should  be  back-file  referenced,  i.e.,  if 
orders  Nos.  1,  17,  27,  40,  etc.,  have  been  placed  with  the 
Crucible  Steel  Company,  order  No.  40  should  have  in  red 
ink  in  a  circle  in  the  upper  right-hand  corner,  the  number  27, 
which  means  that  order  27  is  the  previous  order  given  that 
company;  and  if  order  No.  40  is  not  the  particular  one 
sought,  then  order  27  will  be  looked  at.  Order  27  will 
have  on  it  No.  17,  etc.  This  method  enables  a  clerk  to  find 
all  purchase  orders  placed  with  a  certain  company  by  taking 


PURCHASING    AND    RECEIVING 


53 


note  of  the  last  order  placed.  By  this  means  Information 
can  be  had  as  to  the  number  of  purchase  orders  placed  with 
any  one  concern,  and  also  as  to  the  degree  of  regularity 
with  which  such  purchases  were  made. 

Filing  Material  Receipt  and  Notice 

This  receipt,  as  before  stated,  is  made  out  in  five  copies 
by  the  receiving  clerk,  one  copy  of  which  is  kept  by 
him,  one  sent  to  the  stores  keeper,  one  to  the  purchasing 
agent,  one  to  the  planning  department,  and  one  to  the  stores 
recorder.  When  the  purchasing  agent  receives  this  material 
receipt  and  notice,  it  is  a  signal  for  him  to  look  up  immedi- 
ately the  invoice  and  to  handle  it  in  accordance  with  the  in- 
structions which  are  given  hereafter. 

As  soon  as  the  stores  keeper  receives  his  copy  of  ma- 
terial receipt  and  notice,  it  is  a  notification  to  him  to  prepare 
to  receive  the  goods,  physically  or  otherwise,  and  in  many 
instances  they  should  be  rechecked  by  him.  If  the  goods 
received  have  been  specially  ordered  by  anyone  in  the 
factory,  his  file  will  contain  the  general  stores  requisitions, 
and  these  goods  should  be  immediately  sent  to  fill  such 
requisitions. 

The  copy  sent  to  the  planning  department  should  be 
destroyed  after  it  has  served  its  purpose,  while  the  one 
to  the  stores  recorder  should  be  disposed  of  as  previously 
indicated. 

Special  Instructions  for  Handling  Invoices 

All  invoices,  upon  receipt,  should  go  first  to  the  account- 
ing department  to  be  numbered  and  registered  and  then  be 
immediately  sent  to  the  purchasing  agent. 

The  receiving  of  invoices  in  duplicate  should  be  dis- 
couraged whenever  it  is  possible.  If  a  company  operates 
several  factories  from  one  central  point,  however,  it  may  be 


54 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


necessary  to  have  invoices  in  duplicate.  If  they  are  so  re- 
ceived, one  copy  should  immediately  upon  its  receipt  be 
stamped  "duplicate"  in  large  letters  across  its  face. 

When  the  purchasing  agent  receives  an  invoice  from  a 
shipper,  he  must  take  his  copies  of  the  purchase  order,  pur- 
chase requisition,  and  material  receipt  and  notice,  and  check 
them  against  the  invoice.  If  the  price,  quantity,  and  quality 
of  the  goods  received  are  found  to  be  correct,  he  should  O  K 
these  in  the  proper  places  on  the  invoice,  and  immediately 
forward  this  invoice  to  the  stores  recorder  who,  as  before 
stated,  will  recheck  these  papers,  attach  them  to  the  invoice 
and  immediately  forward  them  to  the  accounting  depart- 
ment. 

In  the  event  of  there  being  a  difference  in  the  price, 
quantity,  or  quality  of  the  goods,  the  purchasing  agent  should 
make  out  a  claim  voucher,  giving  the  exact  quantity  and 
quality  of  the  goods  received,  also  the  amount  of  the  claim, 
what  it  is  for,  and  on  whom  it  is  made.  He  must  attach 
this  to  the  original  invoice,  and  send  it  to  the  stores  recorder. 
(See  Form  8.) 

When  the  stores  recorder  receives  an  invoice  with  a 
claim  voucher  attached,  he  will  enter  in  his  Stores  account 
the  quantity  of  the  goods  received  as  designated  by  the 
material  receipt  and  notice,  check  invoice  accordingly,  and 
if  claim  is  for  shortage  of  goods  to  be  filled  by  subsequent 
shipment,  he  must  send  only  the  invoice  to  the  accounting 
department.  If  this  claim  is  for  other  than  shortage,  he 
will  attach  all  of  his  papers  and  forward  them  to  the  ac- 
counting department  as  already  described. 

When  the  accountant  receives  an  invoice  with  a  claim 
voucher  chargeable  to  the  consignor  attached,  he  will  deduct 
the  amount  of  claim,  in  the  deduction  column,  from  the 
original  invoice  to  the  credit  of  the  consignor,  and  charge 
the  Stores  account  with  the  net  quantity.     If  the  claim 


PURCHASING    AND    RECEIVING 


55 


voucher  is  chargeable  to  a  party  other  than  the  consignor, 
however,  the  accountant  must  then  enter  the  amount  of  the 
original  invoice  to  the  credit  of  the  consignor  and  charge 
the  Stores  account  with  same,  and  then  make  out  a  charge 
voucher  to  cover  the  amount  of  the  claim,  crediting  stores, 
and  charging  the  party  designated  by  the  purchasing  agent 
for  the  amount  of  the  claim. 

It  can  readily  be  seen  that  this  not  only  allows  for  the 
immediate  entry  of  material  into  stores,  together  with  its 
price,  but  that  there  is  no  chance  of  paying  the  amount  in 
full  when  there  is  a  claim  against  the  creditor. 

When  the  claim  is  allowed  and  a  credit  memorandum  is 
received  from  the  consignor,  it  must  only  be  attached  to  the 
charge  voucher ;  no  entry  of  it  is  made,  in  the  event  of  claim 
being  made  for  a  shortage  in  shipment,  as  the  additional 
material  sent  at  some  subsequent  date  must  have  a  new 
invoice. 

Upon  advice  from  the  consignor  to  the  purchasing  agent 
that  goods  have  been  back  ordered,  in  whole  or  in  part,  or 
if  for  any  other  reason  the  purchasing  agent  wishes  to  cancel 
an  order  and  does  so,  copies  of  this  cancellation  should  be 
forwarded  to  the  stores  keeper,  production  department,  and 
stores  recorder  who  will  forward  his  copies  on  file  for  that 
order  to  the  accounting  department,  marking  them  "Balance 
Cancelled"  and  giving  date. 

All  freight  or  express  bills  presented  must  be  checked 
with  receiving  clerk's  copy  of  material  receipt  and  notice, 
and  O  K'd  by  him  after  verifying  each  item.  As  the  re- 
ceiving clerk  thus  verifies  each  item  of  freight,  he  will  enter 
on  his  material  receipt  and  notice  sheet  the  date  of  his  O  K 
and  the  date  of  the  freight  bill.  The  receiving  clerk  must 
ordinarily  O  K  the  entire  bill,  if  correct,  before  the  freight 
bill  can  be  passed  for  payment. 

The  receiving  clerk  should  be  held  strictly  responsible 


S6 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


for  all  material  received  by  him,  and  for  freight  and  express 
items  O  K*d  by  him,  i.e.,  as  to  consignments,  weights,  etc., 
and  a  regular  audit  of  the  freight  bills  with  the  stores 
records  should  be  made  as  with  all  other  departments. 


CHAPTER    IV 


GENERAL  STORES 


Their   importance,   their   control,   and   their 
relation  to  inventories,  production,  and  ac- 
counting, together  with  a  classification  foe 
statistical  purposes. 


CHAPTER    IV 


GENERAL  STORES 

The  following  is  a  brief  outline  of  certain  standardization 
work,  including  its  nomenclature,  that  must  be  agreed  upon 
or  understood  as  a  basis  for  factory  operations,  before  going 
into  more  complete  detail  concerning  actual  instructions, 
specifications,  etc.,  in  connection  with  stores-keeping. 

Orders 
Classification  of  Orders 

Before  undertaking  to  lay  out  the  detail  incident  to 
planning  and  cost  work  in  a  factory,  it  becomes  necessary, 
as  a  first  step,  to  understand  under  just  what  conditions 
orders  shall  be  issued;  by  what  names;  what  relation  they 
shall  bear  one  to  another ;  and  the  kind  of  work  covered  by 
them. 

The  following  tabulation  shows  the  names  of  orders  that 
should  be  used  in  industrial  work.  Prefixing  a  letter  to 
each  order  number  will  always  indicate  the  nature  of  the 
order.  By  this  means  each  kind  of  order  can  have  its  own 
serial  number. 

(A)  Contract  or  Sales  Orders 

(B)  Manufacturing  Orders 

(C)  Production  Orders 

(D)  Prorating  Orders 

(E)  Betterment  Orders 

(F)  Repair  Orders 

(G)  Stores  Orders 

59 


6o 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


These  seven  kinds  of  orders  should  cover  anything  and 
everything  in  a  factory  pertaining  to  labor,  material,  and  ex- 
pense. 

(A)  Contract  or  Sales  Orders 

A  ^'contract"  or  sales  order  is  simply  a  means  for  regis- 
tering, by  name  and  number,  the  whole  quantity  of  some 
given  contract  which,  if  too  large  to  be  put  through  a  factory 
in  total,  would  be  divided  into  several  production  orders. 
Or,  again,  if  too  small  to  be  manufactured  ecomically,  the 
sales  order  would  be  combined  w^ith  several  other  sales 
orders  into  one  production  order,  so  as  to  provide  a  volume 
sufficiently  large  to  justify  a  schedule.     (See  Chapter  IX.) 

In  the  manufacture  of  such  a  product  as  rifles,  for  in- 
stance, sales  orders  would  naturally  be  large,  and  must  be 
divided  into  several  production  orders;  first,  because  the 
bulk  is  too  great  to  put  through  a  factory  in  one  order ;  and 
second,  because  from  a  cost  point  of  view  information  for 
control  of  the  output  from  week  to  week  and  month  to 
month  would  not  be  obtained  often  enough.  In  other  words, 
on  a  contract  for  rifles  that  required  a  year  or  more  to  manu- 
facture there  w^ould  not  be  a  satisfactory  control  of  factory 
operations  during  that  period  were  it  not  divided  up  into 
orders  sufficiently  small  to  give  full  and  complete  costs  fre- 
quently ;  while  a  product  like  machine  tools  for  instance — of 
which  but  one  or  two  are  sold  at  a  time — might  be  made  up 
in  batches  of  twenty-five  or  fifty,  either  for  stock  or  as  a 
combination  of  sales  orders,  so  as  to  get  a  sufficient  volume 
on  which  to  compute  satisfactory  costs. 

(B)  Manufacturing  Orders 

A  '^Manufacturing  Order'*  is  exactly  like  a  contract 
order;  simply  being  a  means  for  registration  and  showing 
by  this  registration  the  divisions  and  quantities  for  proces- 


GENERAL  STORES 


6i 


sing  purposes  on  which  it  is  desirable  or  necessary  to  close 
out  total  manufacturing  costs  under  either  one  of  two 
methods : 

1.  By  applying  overhead  as  well  as  labor  and  material 

costs  to  each  component — perhaps  also  to  each 
operation, 

2.  By  applying  overheads  to  each  complete  unit  covered 

by  a  ^'Production  Order." 

For  simplicity,  the  latter  is  preferable;  for  accuracy  and 
insurance  purposes,  the  former  is  better. 

(C)  Production  Orders 

A  "Production  Order"  is  an  order  not  only  of  registra- 
tion but  also  of  issue;  i.e.,  it  is  issued  to  a  factory  for  the 
actual  producing  of  something  covered  by  a  sales  and  manu- 
facturing order  (except  in  a  plant  run  under  conditions 
whereby  its  product  is  all  made  for  stock;  in  other  words, 
manufactured  to  finished  stores  stock,  from  which  the  sales 
department  would  always  draw  goods). 

All  sales  orders  are  necessarily  received  from  sales  or 
executive  department.  All  manufacturing  orders  are  pre- 
scribed by  a  works  manager,  together  with  a  schedule 
covering  the  same.  All  production  orders  are  issued  or  pro- 
vided for  by  a  production  department,  and  must  be  in 
accordance  with  manufacturing  orders  and  their  schedules. 

Therefore,  the  production  order  for  an  individual  piece 
or  component  would,  in  theory  at  least,  be  a  sales  order, 
say  No.  1501*,  a  manufacturing  order,  say  No.  1;  a  pro- 
duction order,  say  No.  1 ;  plus  the  component  symbol,  say 
"26-117,"  the  whole  presenting  a  symbology  as  follows: 

"lSOl-l-l-26-lir 

This  would  be  the  complete  symbology  for  identifying 
any  and  everything  in  connection  with  a  piece  or  component 


52         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

with  a  sales  order  in  which  "1501"  is  the  order  from  the 
executive  office;  "1/'  the  order  from  the  works  manager  to 
the  production  department;  and  "1,"  the  order  from  the 
production  department  to  the  factory  to  make  a  certain  piece 

in  some  definite  way. 

Production  orders  are   of   several   classes  of  var>'ing 

purposes,  as  follows : 

1.  Processing  Production  Order 

2.  Assembling  Production  Order 

3.  Tools  Stores  Production  Order 

4.  Prorating  or  Expense  Production  Order 

Before  going  further  in  connection  with  orders,  an 
understanding  should  be  had  concerning  the  division  in  a 
product  requiring  different  orders. 

A  model  of  something  is  a  final  and  complete  expression 
of  production.     A  model  may  consist  of  units,  parts,  and 

pieces. 

A  unit  is  something  that  is  operative  in  itself  and  sub- 
ject to  usage  on  any  one  of  several  models;  it  consists  of 
an  assembly  of  parts  and  pieces. 

A  part  is  an  assembly  of  two  or  more  pieces,  in  itself 
inoperative  until  assembled  into  a  unit  or  model,  and  consists 
only  of  an  assembly  of  pieces. 

A  piece  is  an  individual  component  processed  in  some 
definite  form,  which  may  be  assembled  into  a  part,  into  a 
unit,  into  a  model,  or  into  all  three. 

For  example,  a  rifle  would  be  a  model ;  the  lock  mechan- 
ism would  be  a  unit;  and  the  barrel  or  the  butt  a  part. 
Finally  would  come  the  individual  pieces  which  are  as- 
sembled into,  or  with,  the  foregoing. 

Therefore,  a  processing  production  order  is  issued  to 
cover  the  making  of  individual  pieces;  and  an  assembling 
production  order,  for  such  things  as  constitute  a  part.    These 


GENERAL  STORES 


63 


are  then  closed  out  into  component  stores  and  an  assembling 
production  order  issued  for  a  unit,  which  might  consist  of 
two  or  more  pieces  or  parts,  and  which  would  again  be 
closed  out  into  component  stores  and  redrawn  by  a  final 
assembling  production  order  for  the  completion  of  the  model. 
Again,  tools  that  are  manufactured  in  a  tool  room  in 
large  quantities,  such  as  reamers,  drills,  cutters,  screw- 
drivers, etc.,  are  made  under  a  stores  production  order,  be- 
cause when  completed  this  order  will  be  closed  and  the  tools 
charged  to  general  stores,  whence  they  are  distributed  to 
the  factory  and  thus  become  absorbed  into  expense. 

(D)  Prorating  Orders 

In  nearly  all  lines  of  manufacture  there  are  certain 
materials  used  and  certain  work  done  which  cannot  be  so 
figured  as  to  be  directly  chargeable  to  an  individual  piece 
or  component.     By  this  is  meant  such  things  as  plating, 
painting,  enameling;  or,  in  rifle  manufacture,  browning, 
heat-treating,  hardening,  etc.    Therefore,  it  is  proposed  that 
for  such  items,  "Prorating  Orders"  be  issued,  which  will 
enable  work  of  this  character  to  be  done  for  any  one  or  for 
several  manufacturing  orders  combined.     Then  the  total 
expense  of  same  for  some  timed  period— in  no  instance 
longer  than  a  month's  output— would  be  prorated  over  the 
number  of  pieces  done  during  that  period.    That  is  to  say, 
if  15,000  pieces  were  heat-treated  during  a  month,  each 
component  so  treated  would  be  charged  with  a  pro  rata 
amount  of  expense  for  the  work,  which  would  be  in  addition 
to  the  expense  that  was  put  upon  it  by  the  regular  pro- 
duction order.     In  other  words,  this  is  a  sort  of  standing 
order  for  all  the  work  done  by  a  certain  operation,  whether 
the  operation  covers  a  piece  from  one  or  from  several  pro- 

dviction  orders. 

If  the  operation  on  such  work  as  this,  however,  is  for 


64 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


the  same  piece  practically  all  the  time,  it  would  be  con- 
sidered as  an  operation  in  the  regular  processing  of  the  piece 
and  would  then  come  under  a  regular  production  order 
number. 

(E)  Betterment  Orders 

A  "Betterment  Order"  is  an  order  issued  to  a  factory 
for  the  manufacture  or  installation  of  all  items  that  increase 
the  inventory  of  fixed  or  non-merchantable  assets,  or,  in 
other  words,  investment  assets — which  consist  of  the  plant 
and  the  things  that  are  used  in  or  by  it  in  its  operation. 

Betterment  orders  should  be  issued,  for  instance,  for 
real  estate  additions  and  improvements;  for  the  making 
of  additions  to  buildings  or  building  improvements;  for 
the  installation  of  all  machinery;  for  power  improvements 
or  extensions,  etc.,  etc.,  according  to  the  classification  sub- 
mitted below — which  would  be  considered  a  standard  classi- 
fication for  such  things;  and  for  this  reason  assets  are 
divided  up  into  this  classification  because  each  item  calls  for 
a  different  percentage  of  depreciation,  except  real  estate, 
which,  of  course,  rarely  ever  depreciates  but  usually  appre- 
ciates. It  can  be  seen  that  this  classification  is  laid  out  on 
the  Dewey  Decimal  System  plan  so  that  a  distribution  by 
accounting  machines,  such  as  the  "Powers,"  is  possible. 
Therefore,  it  must  be  borne  in  mind  that  each  subdivision 
must  always  be  the  same,  for  which  the  percentage  of 
depreciation  indicated  would  be  written  off. 

El  Real  Estate.    No  depreciation. 

E2  Buildings  and  Building  Equipment 

E2.1  Buildings.    2  to  2y2^o  per  annum. 

E2.2  Building  Equipment.    12  to  15%. 

E2.3  Electrical  Service,  outside  of  lighting,   IS  to 
20%  per  annum. 


GENERAL    STORES 


65 


E3  Office  Furniture  and  Equipment.     15  to  20%  per 

annum. 
E4  Machinery  and  Tools.    7j^  to  10%  per  annum. 
E5  Dies,  Jigs,  Fixtures,  and  Gages.     25  to  50%  per 

annum,  according  to  their  character  and  usage. 
E6  Power  Plant.     10%  per  annum. 
E7  Shop  Fixtures  and  Fittings.    25%  per  annum. 
E8  Patents,  Patterns,  and  Drawings 

E8.1  Patents.     According  to  their  life. 

E8.2  Patterns.     33J/3  to  100%  per  annum. 

E8.3  Drawings.    According  to  their  character. 
E9  Railroad  and  Railroad  Equipment 

E9. 1  Railroad.    1 5  %  per  annum. 

E9.2  Railroad  Equipment.    20%  per  annum. 

This  provides  a  symbology  in  which  ''E"  denotes  fixed 
investment  or  a  "Betterment  Order" ;  the  first  figure  indi- 
cating the  class  of  betterment  order,  and  the  decimals 
indicating  the  subdivisions.  Each  of  these  nine  classes  can 
be  extended  to  cover  all  the  subdivisions  which  may  be  re*- 
quired.    Thus  machinery  and  tools  can  be  divided  into: 

E4.1  Machines 
E4.2  Tools 

Machinery  can  be  still  further  subdivided  into  planers, 
automatics,  screw  machines,  profilers,  etc.,  etc.,  if  anything 
is  to  be  accomplished  by  so  doing. 

From  the  foregoing  it  is  perfectly  evident  that  there  ares 
(1)  for  all  improvements  or  betterments,  a  set  of  standing 
orders  covered  by  "E"  plus  the  number  indicated;  and  (2) 
as  repair  orders  can  be  indicated  by  "F,"  that  for  repairs,  a 
similar  set  of  standing  orders  are  to  be  used  under  'T,"  plus 
the  number  indicated;  and  (3)  that  still  another  set  of  num- 
bers can  be  used  to  cover  depreciations,  so  that  for  all 


66 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


investments  and  repairs  to  same  there  will  be  no  other 
orders  of  any  kind  issued.  The  entire  arrangement  is  such 
that  all  is  subject  to  accounting  machine  methods  of  distri- 
bution, and  these  same  methods  should  be  adhered  to  for 
all  distributions  required  by  a  factory. 

Finally,  it  is  to  be  understood  in  connection  with  all 
betterment  orders  that  they  should  bear  the  same  overhead 
or  factory  burden  as  manufacturing  or  production  orders. 

(F)  Repair  Orders 

To  repair  anything  is  to  restore  it  in  some  degree  to  its 
original  condition;  i.e.,  to  recover  a  loss  that  has  taken 
place  due  to  usage,  depreciation,  etc.  Based  on  this,  in  a 
modern  method  of  accounting,  reservations  should  be  made 
for  depreciation  under  such  a  combination  of  conditions  that 
it  is  permissible  to  draw  upon  these  reservations  to  pay  for 
repairs.  Otherwise  there  is  a  possibility  of  a  big  liability 
account  being  established  which  may,  in  part  at  least,  be 
fictitious.  In  other  words,  if  a  certain  sum  of  money  is  set 
aside  to  cover  depreciations,  and  depreciations  are  recovered 
by  the  application  of  repairs,  the  money  set  aside  for  this 
purpose  should  be  used  to  pay  for  the  repairs,  and  not  have, 
as  is  usual,  a  double  expense  thrust  upon  the  business — one 
in  the  form  of  depreciation  for  replacements,  and  another 
for  repairs. 

The  point  to  be  made  here,  however,  is  that  the  same 
classification  as  illustrated  for  "Assets,"  must  be  used  for 
**Repair  Orders"  (F).  Looked  at  from  another  point  of 
view,  it  means  that  instead  of  having  a  large  number  of 
kinds  of  repair  orders,  they  would  be  confined  simply  to 
a  set  of  standing  repair  orders,  classified  exactly  according 
to  the  asset  classification  of  investments,  and,  as  illustrated 
under  ''Betterments,"  be  carried  into  as  fine  a  classification 
as  desired  by  simply  adding  figures  on  the  decimal  basis. 


GENERAL  STORES 


67 


The  old-fashioned  standing  order  has  become  practically 
obsolete.  There  was  a  time  when  there  were  standing 
orders  to  cover  such  items  as  were  not  charged  to  Plant 
Assets,  Plant  Production,  and  Plant  Repairs ;  and  these  con- 
sisted of  such  items  as  window  washing,  shop  lubrication, 
shop  sweeping,  shop  trucking,  watch  and  fire  services,  etc., 
etc.,  all  of  which  are  absorbed  into  assets  by  way  of  over- 
head charges  put  on  production. 

In  fact,  all  old  methods  of  accounting  employed  a  large 
number  of  standing  orders,  some  of  which  related  to  labor, 
some  to  material,  and  some  to  a  combination  of  labor  and 
material.  Most  of  them,  however,  upon  close  analysis, 
lacked  any  possibility  of  placing  direct  responsibility  on  any 
one  for  their  variation  from  month  to  month  and  year  to 
year. 

Later  and  newer  accounting  methods  have  entirely  elimi- 
nated the  old-fashioned  standing  order,  and  furthermore,  all 
the  elements  of  manufacture  have  been  reduced  to  the  three 
primes : 

1.  Labor 

2.  Material 

3.  Expense 

Therefore,  all  accounting  work  is  so  designed  as  to  deal 
directly  with  these  three  items,  and  to  do  so  a  certain  method 
of  distribution  must  be  adopted  which  will  give  the  labor, 
material,  and  expenses  of  each  department — at  least  monthly 
— divided  into  direct  and  indirect  items.  This  has  invariably 
been  found  to  be  of  much  more  value  for  administrative 
action  than  was  the  old-fashioned  standing  order, 

(G)  Stores  Orders 

"Stores  Orders"  consist  of  orders  placed  in  the  factory 
for  the  manufacture  of  those  items  of  which  a  maximum  and 


68 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


GENERAL  STORES 


69 


minimum  quantity  are  supposed  to  be  kept  in  stores.  They 
have  particular  reference  to  small  tools,  such  as  drills, 
reamers,  screw-drivers,  taps,  dies,  etc.,  which  are  to  be  made 
up  in  quantity  under  a  stores  order  and  taken  into  stores 
as  an  asset  and  held  there  until  distributed  to  the  factory 
over  properly  signed  requisitions.  Some  of  these  articles, 
such  as  screws,  for  instance,  can  be  made  up  in  one  or  two 
days'  output  in  sufficient  quantity  to  cover  the  requirements 
of  a  period  of  several  weeks  or  months. 

This  arrangement  gives  the  stores  keeper  full  opportunity 
for  ordering  anything  that  is  carried  in  stores  on  a  maximum 
or  minimum  basis,  whether  it  is  to  be  purchased  outside  or 
whether  it  is  to  be  made  in  the  factory. 

Stores-Keeping 
Stores 

No  department  in  any  manufacturing  business  contrib- 
utes more  to  its  health  or  wealth  than  do  the  departments 
of  stores-keeping,  which  are  always  three  in  number  and 
sometimes  four,  as  shown  below : 

General  stores,  which  cover  all  purchases  of  any  kind 
whatsoever. 

Component  stores,  which  cover  all  pieces  and  parts  that 
have  been  completely  processed. 

Finished  stores,  which  cover  all  completed  units  or 
models  ready  for  shipment. 

Shop  stores,  which  cover  sub-stores  stations  as  distri- 
buting points  for  stores  issued  on  a  monthly  supply 
basis. 

Requirements  as  to  Stores 

Many  plants  undoubtedly  run  under  what  is  known  as 
"continuous  manufacture."     A  contract  for  240,000  units 


would  mean  a  contract  order  for  that  many.  If  these  are 
to  be  made  up  in  a  year's  time,  they  could  be  divided  up 
into  twelve  manufacturing  orders  of  20,000  each. 

These  manufacturing  orders  would  then  be  divided  again 
into  production  orders,  i.e.,  a  production  order  for  each 
component  required,  and  for  each  assembly  required  whereby 
components  are  assembled  into  a  complete  unit.  Therefore, 
on  a  contract  order,  the  purchasing  agent  would  go  to 
market  for  materials  long  in  advance  of  actual  manufactur- 
ing requirements  and  would  make  contracts  for  such  materi- 
als under  specified  deliveries. 

From  this  it  can  readily  be  seen  that  if  it  takes  30  days 
to  get  material  from  the  market,  and  30  days  to  process  the 
component  from  this  material,  orders  for  material  will  have 
to  be  placed  at  least  60  days  (plus  some  factor  of  safety) 
in  advance  of  the  placing  of  a  manufacturing  order  in  a 
factory;  consequently,  all  terminating  dates  on  a  schedule 
for  purchases  should  be  determined  at  least  90  days  in 
advance  of  the  final  assembly  dates,  specifications  for  which 
should  be  furnished  by  the  production  department. 

It  will  usually  be  necessary  to  have  nearly  all  productive 
material  protected  by  reservations,  and  these  reservations 
will  be  a  very  important  factor  in  stores-keeping ;  therefore, 
stores  balance  sheets  have  been  provided  to  take  care  of  this 
in  detail. 

Routine  of  Stores-Keeping 

In  order  to  understand  how  dependent  accounting  is  on 
a  proper  classification  of  orders,  it  is  necessary  to  have  a 
clear  idea  of  what  the  fundamental  basis  of  industrial  stores- 
keeping  and  accounting  is. 

All  materials  upon  their  receipt  must  be  put  into  general 
stores — general  stores  being  so  broad  in  its  scope  as  to  cover 
everything  that  is  purchased.     Not  only  does  it  include 


70 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


material  for  processing  and  supplies  for  operating,  but  also 
everything  in  the  shape  of  equipment.  In  other  words,  if  a 
new  machine  is  bought  it  must  first  go  into  general  stores 
(at  least  by  way  of  record)  and  be  held  there  in  inventory 
until  it  is  delivered  to  the  factory  over  a  properly  signed 
requisition  chargeable  to  a  betterment  order,  to  which  will 
then  be  added  the  labor  and  materials  used  for  installation, 
the  completion  of  which  will  transfer  the  entire  cost  to 
another  form  of  inventory. 

The  same  rule  applies  to  any  piece  of  furniture  or  office 
or  shop  equipment  which  may  be  bought,  for  it  is  only 
by  thus  passing  everything  through  general  stores  and 
rendering  a  requisition  in  payment  for  it  when  it  is  drawn 
out,  that  a  distribution  of  these  stores  can  be  made  either  to 
production  orders,  assets,  or  operating  expense,  and  it  is  the 
only  basis  upon  which  an  order  department  can  maintain 
a  control  of  orders  and  their  proper  distribution.  In  other 
words,  materials  after  going  into  general  stores  are  held 
there  in  inventory  until  they  are  requisitioned  out  for  some 
production  order,  betterment  order,  repair  order,  or  stores 
order;  the  requisition  being  used  simply  to  credit  "General 
Stores"  and  to  charge  the  order.  Thus  all  production, 
betterment,  and  stores  orders  become  *'Work  in  Progress." 

At  the  end  of  any  month  the  total  amount  of  the  produc- 
tion and  betterment  orders  completed  are  credited  to 
"Work  in  Progress"  and  charged  to  Fixed  Assets,  Com- 
ponent Stores,  or  Finished  Stores,  as  the  case  may  be.  That 
is  to  say,  as  material  is  drawn  from  general  stores  for  any 
production  or  betterment  order,  it  has  added  to  it  the 
labor  and  expenses  incident  to  its  processing  operations,  and 
is  constantly  held  in  inventory  as  "Work  in  Progress"  by 
the  use  of  requisitions  and  time  tickets.  Upon  completion, 
the  total  cost  of  the  order  is  credited  to  Work  in  Progress 
and  charged  to  its  proper  classification. 


GENERAL  STORES 


71 


By  this  relationship  between  orders,  general  stores, 
requisitions,  and  time  tickets,  protected  by  a  proper  system 
of  names  and  numbers,  a  perpetual  inventory  in  all  stages 
of  conversion  between  the  purchase  of  the  material  and  its 
transformation  into  something  else  is  made  possible.  In 
this  way  all  labor,  material,  and  expense  used  in  a  factory 
are  actually  converted  into  tangible  assets  at  the  end  of  each 
and  every  month. 

Usually  all  the  work  connected  with  the  keeping  and 
recording  of  stores  is  placed  under  a  general  stores  keeper 
and  a  stores  recorder,  whose  duties  and  relations  may  be 
outlined  briefly  before  going  into  stores-keeping  in  general. 

General  Stores  Keeper 

The  attempt  is  often  made  to  put  the  entire  stores-keep- 
ing system  under  a  production  or  planning  department. 
Usually  this  is  not  very  satisfactory,  for  the  reason  that  the 
purchasing  agent  and  the  stores  keeper  have  large  problems 
in  the  handling  of  material  entirely  foreign  to  production, 
such  as  the  buying  and  handling  of  all  factory  operating 
supplies  and  general  office  supplies,  which  are  nearly  always 
maintained  on  a  maximum  and  minimum  basis.  These  in- 
clude fuels,  oils,  waste,  small  tools,  etc.,  and  in  addition 
thereto,  equipment,  furniture,  fittings,  stationery,  catalogues, 
etc.,  and  it  must  be  borne  in  mind  that  all  of  these  materials 
should  be  handled  just  as  carefully  as  the  productive 
materials.  It  is  the  physical  storage,  handling,  and  delivery 
of  these  materials  that  constitute  the  real  work  of  a  general 
stores  keeper. 

To  cover  the  requirements,  the  organization  should  be 
laid  out  in  such  a  way  that  the  general  stores  keeper  and 
purchasing  agent  may  work  together  as  closely  as  possible ; 
that  is,  the  general  stores  keeper  should  be  directly  respons- 
ible to  the  purchasing  agent  in  so  far  as  all  general  stores 


72 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


GENERAL  STORES 


73 


(raw  material)  and  their  inventories  are  concerned,  but 
should  be  under  a  works  manager  in  everything  pertaining 
to  the  physical  conditions  required  in  a  plant  for  the  storing 
or  shelving  of  goods  and  for  the  physical  methods  to  be 
employed  for  the  delivery  of  goods  to  the  various  parts  of 
the  factory. 

Stores  Recorder 

There  are  two  methods  by  which  a  stores  recorder  can 
be  governed  in  an  organization — first,  whereby  the  stores 
records  or  ledgers  are  controlled  by  the  purchasing  agent 
(which  under  ordinary  circumstances  is  the  usual  way) ;  and 
second,  whereby  the  records  and  all  work  pertaining  to  them 
are  controlled  by  a  production  department. 

As  the  general  stores  keeper  should  be  at  liberty  to  give 
most  of  his  personal  attention  to  the  movement  of  stores 
as  a  physical  requirement,  there  will  have  to  be,  in  either 
case,  a  stores  recorder  to  take  care  of  all  stores  transactions 
by  way  of  the  stores  ledger,  to  check  purchase  requisitions, 
to  price  general  stores  requisitions,  to  check  invoices,  and  to 
make  out  purchase  requisitions  to  cover  maximum  and  mini- 
mum amounts. 

The  undesirability  of  putting  the  stores  ledgers  and 
records  in  the  charge  of  any  other  than  the  stores  keeper 
and  the  purchasing  agent,  is  again  apparent  here,  for  the 
simple  reason  that  all  non-productive  materials  and  operat- 
ing supplies  must  be  carried  in  exactly  the  same  ledgers  as 
productive  material.  However,  as  stores  cannot  be  carried 
in  one  general  stores  room,  but  must  of  necessity  be  located 
at  different  points,  the  location  of  the  stores  recorder  will 
have  to  be  at  some  central  point  of  operation,  preferably  in 
or  adjacent  to  a  production  department,  to  which  he  can 
supply  whatever  information  it  may  require.  In  addi- 
tion to  this,  the  general  stores  keeper  should  have  charge  of 


the  receiving  department  and  have  under  him  a  receiving 
clerk  in  charge  of  such  department. 

By  this  method  of  organization,  the  purchasing  depart- 
ment is  held  entirely  responsible  for  the  purchase  of 
material,  its  delivery  into  stores,  its  placing  into  a  stores 
inventory  account,  and  its  final  delivery  to  the  factory  for 
processing  or  usage.  The  responsibility  in  connection  with 
the  latter  will  be  set  forth  later,  but  attention  is  here  called 
to  the  fact  that  this  method  creates  a  complete  unit  of  or- 
ganization in  itself,  a  highly  desirable  thing  to  do  if  possible. 

Bureau  of  Censorship  of  Materials 

On  the  other  hand,  it  is  quite  possible  that  it  may  be 
necessary  in  a  plant  of  large  size  to  have  a  "Bureau  of 
Censorship"  on  materials,  first,  to  cover  purchasing,  and, 
second,  to  cover  withdrawals  of  materials  from  stores  for 
usage ;  in  which  case  all  requisitions  for  purchase  which  are 
or  are  not  covered  by  a  production  order,  betterment  order, 
repair  order,  or  maximum  and  minimum  quantities,  would 
have  to  be  referred  to  the  bureau  of  censorship  for  approval. 
This  bureau  of  censorship  would  naturally  be  controlled  by 
the  production  department.  As  all  requisitions  for  the  actual 
withdrawal  of  material  from  stores  would  be  made  out  in 
this  same  department,  it  would  be  necessary  to  place  in  this 
department  a  stores  recorder  who  would  have  charge  of  all 
stores  transactions,  as  stated  above. 

Under  this  system,  foremen  and  all  others  having 
authority  to  do  so,  have  to  use  a  "request  ticket,"  and  this  is 
converted  into  a  general  stores  requisition  by  the  stores 
recorder  or  his  assistants.  In  so  far  as  the  accuracy  of  stores 
records  are  concerned,  this  plan  may  be  as  good  as  the  other, 
but  there  would  seem  to  be  two  undesirable  things  about  it. 
First,  the  purchasing  agent  or  stores  keeper  cannot  be  held 
responsible  for  the  inventories  of  material  which  he  has 


74        UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

under  his  charge,  and,  second,  it  would  seem  that  a  great 
deal  of  delay  in  getting  requisitions  filled  for  the  factory 
might  be  occasioned.  In  other  words,  from  an  accounting 
point  of  view  it  would  not  make  any  difference;  from  an 
organization  point  of  view  and  from  a  delivery  point  of  view 
it  might  not  work  so  well. 

Control  of  General  Stores 

As  has  already  been  explained,  materials  are  bought  and 
passed  into  general  stores  and  held  there  in  inventory  until 
they  are  requisitioned  out  for  some  production  order,  better- 
ment order,  repair  order,  or  standing  order;  a  requisition 
being  used  to  credit  general  stores  and  to  charge  the  order. 
Thus  all  production  and  betterment  orders  become  "Work 
in  Progress.'*  At  the  end  of  the  month,  the  total  amount  of 
production  and  betterment  orders  completed  is  credited  to 
*'Work  in  Progress"  and  charged  to  Investment,  Assets, 
Corr^onent  Stores,  or  Finished  Stores,  as  the  case  may  be. 

Under  this  routine,  as  material  is  drawn  from  general 
stores  for  any  production  or  betterment  order,  it  has  added 
to  it  the  labor  and  expense  incident  to  its  processing  opera- 
tions, and  is  constantly  held  in  inventory  by  the  use  of 
requisitions,  time  tickets,  etc.,  until  the  work  upon  it  is 
completed;  then  credits,  as  cited  above,  are  made  and  the 
total  cost  of  the  production  order,  when  completed,  is 
charged  into  Component  Stores  for  all  finished  pieces  or 
parts  as  may  be  required  for  stock,  and  into  Finished  Stores 
for  all  completed  units.  Then,  Finished  Stores  is  credited 
and  Sales  is  charged  for  all  goods  shipped,  after  which  the 
transactions  become  current  bookkeeping.  Therefore,  from 
this  it  can  readily  be  seen  that  it  is  absolutely  necessary 
to  keep  control  of  materials  by  the  proper  use  of  requisitions, 
time-keeping  tickets,  and  means  for  expense  distribution, 
because  the  whole  process  is  one  by  which  all  the  material, 


GENERAL    STORES 


75 


labor,  and  expense  of  a  factory  are  converted  into  assets  at 
the  end  of  each  month. 

From  the  above,  it  becomes  apparent  at  once  that,  first, 
the  stores  keeper  is  the  merchant  of  the  plant ;  second,  that 
every  requisition  is  a  check  given  in  payment  for  material ; 
third,  that  as  in  a  banking  business,  a  centralized  clearing 
house  must  be  organized  to  handle  checks  and  get  them 
cleared  to  their  proper  charge  account. 

General  Stores  Record 

Theoretically,  a  stores  record  sheet  has  many  functions. 
It  is  a  record  of  all  material  given  out,  and  shows  for  what 
purpose  it  is  given  out,  etc. ;  it  is  a  perpetual  inventory  of  the 
quantities  and  the  value  of  materials  on  hand  at  any  given 
time,  and  a  perpetual  inventory  of  the  quantity  outstanding 
on  orders  and  under  reserve ;  it  is  a  means  for  pricing  all 
requisitions  calling  for  material ;  and,  finally,  it  becomes  a 
complete  record  of  any  and  all  variations  in  price,  and 
furnishes  chronological  information  as  to  quantities  of 
material  consumed  for  any  given  time. 

A  thorough  understanding  of  the  means  of  recording 
the  issue  of  material  from  stores  into  "Work  in  Progress" 
and  vice  versa  may  be  derived  from  a  consideration  of  the 
form  of  general  stores  record  shown  in  Form  9,  the  headings 
of  which  are  almost  self-explanatory. 

It  will  be  noticed  that  the  heading  of  this  sheet  is  made 
to  show  not  maximum  and  minimum  quantities  (as  is 
usual),  but  such  an  amount  of  material  as  will  protect  a 
factory's  operation  for  whatever  length  of  time  it  takes  to 
get  material  from  the  market,  taking  into  consideration  res- 
ervations.   Thus,  the  caption  "When  balance  on  hand,  less 

reservation,  is  under ,  order ,    means 

that  no  reservation  can  be  considered  available  in  consider- 
ing the  low  point  at  which  to  buy,  and  that  when  the 


76 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


GENERAL  STORES 


17 


quantity  is  down  to  a  very  low  point  additional  quantities 
must  be  ordered  up  to  some  maximum  point. 

If  a  unit  of  any  kind  is  to  be  made  at  the  rate  of  3,000 
per  day,  and  it  takes  ten  days  to  get  stock  after  placing  the 
order,  the  minimum  inventory  at  the  factory  would  be, 
under  ordinary  conditions  of  operation,  sufficient  materials 
of  all  kinds  for  30,000  units,  and  it  would  be  the  stores 
keeper's  business  to  notify  immediately  the  purchasing  agent 
when  the  inventory  on  such  material  was  down  to  the 
ordering  point,  as  the  30,000  minimum  would  be  practically 
all  consumed  by  the  time  the  new  shipments  were  received. 
A  factor  of  safety  should  be  allowed  which  would  perhaps 
make  material  for  40,000  units  the  low  point  at  which  to 
re-order. 

At  the  top  of  the  record  sheet  is  also  shown  a  description 
of  each  item — each  item  being  on  a  separate  sheet.  The 
unit  of  measure  by  which  the  item  is  bought  is  given,  as 
pounds,  gallons,  pieces,  yards,  etc.,  and  immediately  under 
this  is  shown  the  location  of  material  as  to  building  number, 
floor  number,  aisle  number,  and  bin  number.  In  this  way 
the  stores  recorder  will  have  absolute  information  as  to  the 
location  of  any  and  all  kinds  of  material,  and  can  quickly 
and  easily  find  or  check  it  over  if  it  becomes  necessary. 
Further,  this  gives  the  stores  recorder  absolute  command 
of  all  stores,  by  record,  and  will  enable  him  to  show  location 
on  requisition,  so  that  the  stores  keeper  can  send  stores 
clerks  or  truckmen  to  the  proper  point  for  the  drawing  of 
material  to  be  delivered. 

In  a  properly  arranged  stores-keeping  department  the 
entire  layout  of  a  floor  space,  aisles,  bins,  etc.,  should  be 
represented  by  a  drawing  or  diagram.  This  will  greatly 
facilitate  the  work  of  the  stores  keeper,  and  simplify  the 
breaking  in  of  new  clerks,  stock  men,  etc.,  as  they  are  taken 
into  the  employ  of  the  company  from  time  to  time. 


These  stores  record  sheets  must  be  Indexed  under  the 
classification  mentioned  hereafter  for  ready  reference  and 
handling,  as  regards  posting,  etc.  The  stores  recorder 
should  be  held  absolutely  responsible  for  the  placing  of  his 
requisition  for  purchase  or  manufacture  (the  latter  in  case 
of  items  made  by  the  factory  and  carried  in  stock,  such  as 
drills,  reamers,  taps,  dies,  etc.),  but  not  for  delays  in  pur- 
chasing or  deliveries,  provided  his  requisition  has  been  given 
to  the  purchasing  department  or  the  production  department 
in  time. 

The  first  entry  on  the  stores  record  sheet  will  be  the 
inventory  at  the  time  the  sheet  is  opened,  under  the 
''Received"  column,  showing  the  date  of  inventory,  etc.; 
following  this,  in  the  first  column,  ''Ordered,"  will  be  en- 
tered the  date,  purchase  order  number,  and  quantity.  Upon 
receipt  of  "Material  Receipt  and  Notice"  by  stores  record 
clerk,  he  will  immediately  enter  the  amount  shown  on  same 
in  the  "Received"  column  of  the  stores  record  sheet,  giving 
date,  purchase  order  number,  and  quantity;  checking  his 
"Material  Received"  memorandum,  purchase  order  and  pur- 
chasing requisition  at  the  same  time.  Upon  receipt  of  in- 
voice, these  three  forms  will  be  assembled  with  the  invoice, 
and  the  unit  price  entered  in  its  proper  place,  and  all  papers 
then  forwarded  to  the  accounting  department.  This  opera- 
tion will  be  repeated  for  all  items  received. 

As  fast  as  requisitions  are  received  at  the  stores  room 
and  the  material  is  delivered,  the  quantity,  called  for  by  the 
requisition  will  be  entered  in  the  "Issued"  column  of  the 
stores  record  sheet,  showing  the  requisition  number  and 
date  on  which  the  material  was  delivered,  together  with  the 
quantity  and  unit  price.  At  the  same  time  that  this  is  done, 
the  unit  price  and  amount  will  be  extended  on  the  requisition, 
and  always  the  balance  of  the  quantity  on  hand  must  be 
entered  in  the  "Balance"  column.    A  column  has  been  pro- 


I?* 
1- 


i1 


78 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


GENERAL    STORES 


79 


vided  showing  "Reserved,"  so  that  no  subsequent  produc- 
tion order  can  be  put  into  the  factory  demanding  the  same 
kind  of  material  and  obtain  it,  unless  there  is  an  excess  of 
the  amount  reserved  for  the  first  production  order.  Under 
the  "Reserved"  caption  the  date  and  quantity  of  the  reserve 
are  entered,  and  under  "For"  will  be  shown  the  order  number 
for  which  the  material  is  reserved.  As  fast  as  the  production 
order  number  is  provided  with  this  material,  it  will  be  en- 
tered in  the  "Issued"  column,  the  same  as  any  other  material. 
Therefore,  it  can  readily  be  seen  that  the  amount  available 
for  any  new  production  order  will  be  the  difference  between 
the  balance  in  stores  and  the  total  amount  reserved. 

At  the  extreme  right  of  the  stores  record  sheet  are  pro- 
vided five  columns  for  "Balances" ;  the  first  column  showing 
balance  "On  Order,"  the  difference  between  the  "Quantity" 
column  of  "Ordered"  and  "Received";  the  second  column 
showing  balance  "In  Reserve,"  the  difference  between  "Re- 
ceived" and  red  ink  entries  under  "Issued"  column ;  the  third 
column  showing  "Available,"  the  difference  between  "In 
Reserve"  and  "On  Hand  in  Stock" ;  the  fourth  column  show- 
ing, quantity  "On  Hand  in  Stock,"  the  difference  between 
"Received"  and  "Issued" ;  and  the  fifth  column,  "Value  on 
Hand,"  or  inventory  value  of  "On  Hand  in  Stock." 

The  unit  price  entered  on  the  stores  record  must  be  the 
absolute  cost,  which  means  that  all  trade  discounts  must  be 
deducted,  and  the  net  price  per  piece  or  quantity  used,  instead 
of  the  total  purchase  of  any  particular  material.  By  this 
means  this  sheet  becomes  not  only  a  stores  record  of  goods 
received  and  given  out,  but  also  the  standard  price  sheet  for 
the  use  of  the  purchasing  agent  and  the  source  from  which 
the  stores  recorder  enters  on  the  requisition  for  purchase 
the  last  price  paid  and  other  data  required.  A  ten  days'  cash 
discount,  etc.,  should  never  be  taken  off  the  figures  as  shown 
on  the  invoices,  as  this  form  of  discount  is  an  earning  of 


the  financial  department  and  should  be  credited  to  its  ad- 
ministration and  not  taken  into  consideration  in  connection 
with  the  cost  of  production. 

The  price  to  be  used  for  any  costing  or  inventory  pur- 
poses should  always  be  the  last  purchase  price  from  any 
regular  source  of  supply.  If,  however,  material  has  been 
purchased  in  large  quantity,  or  of  special  quality  or  price, 
an  effort  should  be  made  by  the  record  clerk  to  carry  these 
prices  with  the  quantity  so  purchased. 

The  particular  thing  to  which  attention  should  be  called, 
in  connection  with  the  keeping  of  stores  and  stores  records, 
is  the  importance  of  keeping  these  records  posted  up  to 
date — up  to  the  minute — as  to  the  quantity  received,  quan- 
tity given  out,  balance  on  hand,  and  prices.  The  value  of 
this  cannot  be  overestimated,  as  these  records  become  a 
bureau  of  information  for  several  purposes;  first,  for  the 
purchasing  agent;  second,  for  the  planning  department; 
third,  for  the  cost  department  in  making  costs  and  distribu- 
tions (as  on  these  sheets  every  requisition  is  priced  for  the 
amount  of  material  drawn  over  the  requisition).  They  give 
a  chronological  history  of  each  item  of  stores,  and  of  the 
quantities  and  various  kinds  of  materials  or  supplies  used, 
so  that  in  a  very  short  time  the  stores  keeper  and  purchasing 
agent  can  establish  from  this  history  absolutely  correct  maxi- 
mum and  minimum  quantities,  and  thus  reduce  the  cost  of 
investment  for  material  to  a  minimum.  An  examination 
of  these  stores  record  sheets  will  always  indicate  to  the 
purchasing  agent  or  works  manager  how  well  purchases  are 
being  made  and  how  much  unnecessary  investment  may 
have  been  made  in  any  items  by  purchasing  in  too  large 
quantities.  Finally,  the  perpetual  inventory  is  kept  checked 
against  the  controlling  account  by  means  of  these  stores 
records. 

From  the  foregoing  it  can  be  seen  what  an  all-important 


8o 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


proposition  the  keeping  of  the  stores  records  is,  and  particu- 
larly the  keeping  of  these  records  posted  accurately  and 
right  up  to  date,  and  with  due  consideration  for  reservation. 

Classification  of  General  Stores 

There  are  two  prime  classifications  into  which  general 
stores  should  be  divided,  for  statistical  and  indexing  reasons : 

(1)  Office  Materials,  (2)  Factory  Materials.  A  com- 
plete classification  for  accounting  and  general  purposes  is 
given  in  the  stores  ledger  shown  in  Form  95. 

Factory  materials  for  such  purposes  are  divided  into 
four  classes  as  follows : 

(a)  Operating  Supplies 

(b)  Manufacturing  Supplies 

(c)  Manufacturing  Materials 

(d)  Equipment 

This  classification  is  not  used  for  keeping  stores  or  for 
accounting  work,  but  is  used  for  indexing  purposes;  and 
also  provides  a  means  whereby  statistics  can  be  obtained 
at  any  time  regarding  the  amounts  of  such  materials  used. 
These  statistics  are  very  valuable  because  of  the  fact  that 
contracts  are  often  made  and  prices  obtained  based  on  the 
quantities  consumed  of  any  particular  commodity,  and  a 
little  adding  machine  work  on  the  stores  records  in  connec- 
tion with  this  classification  will  always  reveal  this  for  either 
statistical  or  purchasing  purposes.  In  order  to  make  this 
classification  perfectly  clear,  the  kinds  of  items  that  would 
go  into  them  are  given  below, 

1.    Office  Materials — Classification 

These  consist  of  any  and  all  kinds  of  supplies  for  office 
work,    for    recording   and    accounting   work,    advertising 


GENERAL  STORES 


8l 


matter,  etc.  This  kind  of  material  should  be  classified  on  the 
indexes  for  stores-keeping  about  as  follows : 


Advertising  Matter 
Bands,  Rubber 
Baskets,  Waste 
Blotting  Paper 
Brushes,  Typewriter 
Carbon  Paper 
Clips 

Copy  Paper 
Envelopes 
Erasers,  Pencil 
Erasers,  Typewriter 
Forms,  Cards 
Forms,  Loose-Leaf 
Forms,  Printed 
Inks,  Stamping 
Inks,  Writing 


Ink  Wells 

Letterheads 

Pads,  Scribbling 

Paste 

Pencils 

Punches 

Pen  Holders 

Pens 

Pins 

Ribbons,  Typewriter 

Rulers 

Second  Sheets 

Shorthand  Books 

Stamp  Pads 

Trays,  Letter 

Twine,  etc. 


2.    Factory  Materials— Classification 

These,  as  stated  above,  are  divided  into  four  classes  for 
indexing  purposes  only,  the  first  of  which  is: 

(a)  Operating  Supplies.  These  consist  of  all  such 
supplies  as  are  used  for  operating,  or  making  repairs  to  the 
plant  or  to  the  machinery  in  the  plant,  and  will  consist  of 
about  such  a  classification  of  items  as  given  below,  although 
it  must  be  borne  in  mind  that  there  are  items  in  this  classi- 
fication that  might  be  used  as  productive  material. 


Asbestos 

Babbitt 

Belting 


Materials 

Brooms 
Brushes,  Air 
Brushes,  Motor 


82         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


GENERAL    STORES 


83 


Carbon 

Packing 

Compounds 

Piping 

Electrical  Supplies 

Plumbing  Supplies 

Emery  Cloth  and  Paper 

Potash 

Excelsior 

Rivets 

Fuels 

Rope 

Gaskets 

Rubber 

Glass 

Sandpaper 

Glue 

Soap 

Inks,  Office 

Tin 

Iron,  Galvanized 

Toilet  Paper 

Leather,  Lace 

Twine 

Nails 

Waste 

Oil  Cans 

Wax 

Oils 

Wire 

Tools — Small  and  Hand 

Bits 

Handles 

Checks 

Jigs 

Chisels 

Knives 

Dies 

Miscellaneous 

Drills 

Soldering  Irons 

Emery  Wheels 

Stones 

Files 

Torches 

TTammers 

Wrenches 

(b)  Manufacturing  Supplies.  These  will  consist  of  all 
kinds  of  material  that  are  used  in  the  product  made  for  sale, 
and  measured  out  in  quantities  in  such  a  way  as  not  to  be 
chargeable  to  any  specific  piece,  part,  or  unit,  for  the  reasons 
that  it  would  be  almost  impossible  to  measure  the  exact 
quantity  used  in  or  upon  any  individual  part.  This  kind  of 
stores  is  often  drawn  out  in  bulk,  such  quantities  being  used 
as  are  required,  and  the  remainder  returned  to  stores  on  a 


credit  memorandum ;  for  it  is  impossible  in  many  instances 
to  specify  the  exact  amount  of  material  needed.  The  fol- 
lowing items  indicate  the  nature  of  the  articles  that  go  into 
this  classification: 


Alcohol,  Spirits 

Screws,  Machine 

Alcohol,  Wood 

Shellac 

Oil 

Tape 

Paints 

etc. 

Putty 

(c)  Manufacturing  Materials.  These  consist  of  all 
materials  which  are  used  in  the  actual  product  made  for 
sale,  and  which  are  charged  directly  to  piece,  part,  unit,  etc., 
or  to  a  production  order  in  its  entirety. 

Properly  speaking,  both  manufacturing  supplies  and 
materials  are  one  and  the  same  thing;  but  the  reason  for 
recommending  a  subdivision  of  these  two  is  that  it  is  neces- 
sary to  exercise  a  great  deal  more  care  with  manufacturing 
supplies  than  it  is  with  manufacturing  materials  in  issuing 
them  to  the  factory,  since  the  exact  quantity  of  the  former 
required  for  a  given  production  order  is  frequently  not 
specified  or  limited. 

(d)  Equipment.  For  indexing  purposes,  this  consists 
of  all  such  equipment  and  machinery  as  is  bought  for  the 
plant,  and  not,  as  yet,  charged  out  to  the  plant  under  a 
betterment  order. 

Classification  of  General  Stores— For  Stores-Indexing 

It  is  almost  impossible  to  provide  at  the  start  every  item 
of  classification  that  will  be  required ;  but  a  general  scheme 
should  be  adopted  which  may  be  added  to  from  time  to  time 
as  classifications  for  inventory  become  necessary.  It  is 
preferable  to  classify  primarily  under  the  kinds  of  materials 
used,  for  two  reasons :  it  makes  the  handling  of  the  stores 


84        UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

record  sheets  much  more  rapid,  and  at  the  same  time  it  gives 
a  statement  every  month  of  the  consumption  of  the  various 
kinds  of  materials  that  are  used. 

As  before  stated,  general  stores  are  divided  into  two 
prime  classifications:  (1)  office  materials,  and  (2)  factory 
materials,  which  are  the  same  for  both  stores-indexing  and 
statistical  purposes.  The  subdivisions  of  these  two  classes 
are  as  given  below: 

Office  Materials.     Subdivision  same  as  already  given. 

(See  pages  80,  81.)  . 

Factory  Materials.  For  purposes  of  stores-indexing, 
these  materials  should  be  classified  about  as  follows  ac- 
cording to  the  kind  of  material  and  the  items  made  of  that 
material : 


I.  Brass  and  Bronze 

Castings 
Cocks 

Cups,  Grease 
Cups,  Oil 
Sheet 
Rod 

11.   COMPOUNM 

Commutator 

Cutting 

Drilling 


Screws 

Valves 

Washers 

Wire 

Miscellaneous 


Polishing 
Miscellaneous 


III.  Copper 

Sheet 
Tubing 
Wire 
Rivets 


Washers 
Castings 
Miscellaneous 


GENERAL    STORES 


85 


IV.  Emery 

Cloth 

Wheels 

Powder 

Miscellaneous 

V.  Fibre 

Rings 

Gaskets 

Disks 

Miscellaneous 

VI.  Fuel 

Coal 

VII.  Glass 

Disks 

Window 

Tubes 

Miscellaneouii 

VIII.  Iron 

Bar 

Sheets 

Bolts 

Screws 

Castings,  Gray 

Tubes 

Castings,  Malleable 

Washers 

Forgings 

Wire 

Nails 

Miscellaneous 

Rivets 

IX.  Stf.f.l 

Shafting 

Tool 

Sheet 

Tubing 

Bar 

X.  Lumber 

Boards 

Timber 

Planking 

Miscellaneous 

XL  Oils  and  Grease 

Lubricating  Oils 

Greases 

86         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


XII.  Packing 

Asbestos 

Metallic 

Gaskets 

Wick 

Hemp 

Miscellaneous 

XIII.  Paper 

Books 

Stationery 

Catalogues 

Wrapping 

Circulars 

Sand 

Drawing 

Miscellaneous 

Printed  Form 

XIV.  Rubber 

Diaphragms 

Seatings 

Gaskets 

Sheet 

Hose 

Tubing 

Rings 

Washers 

XV.  Leather 

Belting 

Washers 

Lace 

Miscellaneous 

The  Issuing  of  Material  from  Stores 
General  Stores  Requisitions 

Form  10  is  to  be  used  for  the  purpose  of  obtaining 
material  and  supplies  from  stores,  as  no  items  of  whatso- 
ever nature  bought  by  the  company  should  be  issued  by  the 
stores  keeper  except  over  this  form  properly  signed.  The 
production  department  will  issue  all  requisitions  for  materials 
needed  for  regular  production  orders,  but  not  always  for 
supplies  for  operating  the  plant.  The  requisition  must, 
under  all  circumstances,  show  the  order  number  to  which 
the  material  is  to  be  charged,  as  well  as  the  number  of  the 
department  which  draws  the  material.    Where  materials  for 


GENERAL    STORES  g^ 

operating  supplies,  etc.,  are  drawn,  which  are  not  covered 
by  any  production,  betterment,  repair,  or  standing  order 
number,  the  requisition  must,  without  exception,  show  the 
department  drawing  the  material  and  must  be  properly 
signed  by  the  head  of  that  department.  Under  no  circum- 
stances can  the  head  of  one  department  use  his  requisition 
to  draw  material  from  another  department,  or  from  the 
inspectors ;  through  general  stores  only  will  it  be  honored. 
In  every  instance  the  quantity  and  kind  of  material  must 
be  plainly  set  forth  upon  the  requisition  as  follows : 

L  Material,  symbol,  and  number  of  requisition. 

2.  Charge  number  or  order  number  which  is  entered 

against  the  proper  class  of  order  as  shown  on  the 
requisition.  The  symbols  shown  thereon  desig- 
nate the  following  classes  of  orders : 

(A)  Contract  or  Sales  Orders 

(B)  Manufacturing  Orders 

(C)  Production  Orders 

(D)  Prorating  Orders 

(E)  Betterment  Orders 

(F)  Repair  Orders 

(G)  Stores  Orders 

3.  The  quantity  designated  and  a  clear  description  of 

the  article. 

4.  The  department  to  which  delivery  is  to  be  made  and 

the  time  when  delivery  is  required. 

5.  The  signature  of  a  duly  authorized  party. 

6.  The  date  on  which  made  out. 

Exceptions  may  be  made  to  this  rule  in  the  case  of  the 
manager  and  any  superintendent,  by  allowing  them  to  use 
their  respective  pads,  which  should  be  especially  assigned 
to  them  by  a  key  number,  as  they  find  it  necessary.  When 
this  is  done  the  requisition  must  be  O  K'd  by  the  superin- 


88         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

pTooIrlv  'if  '^"^""'T'  '°'  ^^'^'^  '""^  '"^'^"-1  -  drawn 
W  oJth  T'  '"^  '  ''^•^''  n^emorandum  made  out  in 

and  Z  f  r'""'"'  ^'""^  ''^^'^  'h^  ""^'^ri^l  was  taken 
and  this  must  be  attached  to  the  requisition 

stores  Cer'is^r'  '"  "!!"''  ''  P^'^'^"^^^  ''''''^'  '^^^  the 
bouS  A  ^.l  .  '""■'''""'  °^  *'^^  P'^"t'  that  everything 
bought  by  the  factory  is  put  into  his  custody  to  be  so  d  Z 

h.m  to  the  various  departments,  and  that  these  requst^ons 
are  nothmg  more  or  less  than  checks  made  out  and  7^Z 

and  a,     he"        "  '''  T"^'^*""  '^  "°'  Properly' made  out 

th,/V'  7'"''"  '^^'  '^'  ''°'''  ^''P''  should  bear  in  mind 
that  his  department  must  be  conducted  as  an  ab  oSv 

mdependent  business;  he  buys  goods  over  his  purcha  e     ' 

quisuion.  and  sells  these  goods  to  the  facto"   ove,     s 

gnera    stores  requisitions.     Every  night  his  sJock  shouH 

atltatr  "''  ''  ''  ''  ""•  ''  ^'  '^  ^  ^^^^  -ictly 

chart  callS  "sT  '' r'  "'"'"'  ''  ''''''''  '''''^'  *«  have  a 
Chart  called     Stores  Location  Chart."  so  that  the  stores 

re  order  can  accurately  route  each  requisition  by  entering 
this  .nformatxon  in  the  space  provided  on  the  form  ^ 

out  nduXatr  rr?'  ''''  *'"^  "^"'^'*'°-  ^^  -de 
out  m  duplicate.    The  stores  recorder  will  be  either  located 

n.  or  adjacent  to,  the  planning  department.  All  requisitions 
for  production  material  will  be  accompanied  by  a  roudn^ 

ag  which  should  be  attached  by  the  st'ores  kee^r  to tch 
lo  of  material  called  for  by  a  requisition.  C^all  ofh^ 
materials,  such  as  operating  supplies,  etc.,  which  mth    be 

equisitioned  direct  by  department  heads,  the  storeTkeeper 
should  put  a  routing  tag  on  the  material  toTs  pX 
destination  which,  of  course,  will  be  indicated  on  the  requfs 


GENERAL    STORES 


89 


tion  Itself.  It  IS  a  much  safer  way  to  route  material  than 
It  IS  to  make  duplicate  requisitions  which  cannot  be  fastened 
or  tied  to  the  material  in  any  convenient  way. 

Stores  Credit  Memorandum 

Form  1 1  is  to  be  used  by  all  heads  of  departments  for 
creditmg  any  department  with  materials  drawn  from  stores 
which  It  cannot  or  does  not  use,  and  which  are  returned  to 
stores.     It  must  be  borne  in  mind  that  all  material  drawn 
over  a  requisition  is  charged  up  to  its  proper  order  or  account 
number  immediately  after  it  is  taken  from  the  stores  depart- 
ment, and  if  subsequent  work  or  operations  show  too  much 
material  has  been  drawn,  or  defects  are  discovered  in  the 
material,  this  form  is  used  to  give  a  credit  to  the  job.    For 
this  purpose  it  is  immediately  sent  to  the  stores  keeper 
together  with  the  surplus  or  rejected  materials.    Unless  the 
material  accompanies  this  credit  memorandum,  the  stores 
keeper  will  not  accept  it,  for  he  must  get  his  material  back 
mto  stores  before  he  can  apply  the  credit.     The  credit 
memorandum  must  be  signed  by  the  planning  department 
or  a  department  head  authorized  to  do  so,  and  also  by  the 
stores  keeper,  before  it  is  turned  over  to  the  stores  recorder, 
where  the  material  must  be  priced  exactly  the  same  as  in  the 
requisition,  be  entered  on  the  received  side  of  the  stores 
record,  and,  under  'Trom  Whom,"  the  production  order 
number  be  entered  in  red  ink. 

^  This  stores  credit  memorandum  is  of  as  much  importance 
in  the  handling  of  stores  as  is  the  requisition,  these  two 
kinds  of  forms  constituting  the  debits  and  credits  in  so  far 
as  general  stores-keeping  and  the  factory  are  concerned 
For  example,  if  100  bolts  are  drawn  out  of  general  stores 
tor  a  production  order  and  10  of  them  are  found  defective, 
10  more  bolts  will  be  drawn  out  on  another  requisition  ac- 
companied by  a  credit  memorandum  for  10  bolts,  and  the 


90 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


10  bolts  drawn  out  on  the  second  requisition  will  be  charged 
off  by  the  record  clerk  to  either  "Scrap"  or  "Defective 
Pieces,"  so  that  by  this  means  the  balance  of  his  stores 
record  sheets  will  always  check  his  stock,  and  at  the  same 
time  dispose  of  any  defective  material. 

Again,  the  tool  room  might  draw  out  on  requisition  a 
dozen  \2"  flat  files.  Immediately  afterwards  another  fore- 
man might  present  a  requisition  for  these  files,  and,  there 
not  being  any  in  stock,  he  might  be  given  six  of  the  files  that 
had  been  taken  out  by  the  tool  room.  In  such  case  the  six 
files  would  be  passed  back  into  general  stores  from  the  tool 
room  by  a  credit  memorandum,  and  the  requisition  from  the 
other  foreman  changed  to  six  and  turned  into  stores ;  thus 
leaving  six  files  charged  to  each  department.  It  must  be 
borne  in  mind,  however,  that  these  transactions  must  not 
take  place  between  departments,  but  through  the  stores  de- 
partment as  a  clearing  house. 

These  stores  requisitions  and  credit  memoranda  can 
both  be  used  in  conjunction  with  component  stores  in  the 
same  way  as  they  are  with  general  stores,  if  desired,  but 
it  is  much  better  to  use  for  this  purpose  a  combined  form 
headed  "Component  Stores  Requisition  and  Credit"  but 
otherwise  bearing  the  same  data. 


CHAPTER    V 

COMPONENT   AND    FINISHED    STORES 

Showing  how  they  differ  from  general  stores 
both  in  character  and  their  method  of  record; 
together  with  a  discussion  of  their  inven- 
toried values,  their  control,  and  their  relation 
to  accounting. 


CHAPTER    V 


COMPONENT    AND    FINISHED    STORES 


Nature  of  Component  and  Finished  Stores 

When  material  is  issued  to  the  factory  for  the  manu- 
facture of  pieces  or  parts,  it  is  charged  to  a  production  order 
covering  same;  and  the  amount  of  material,  as  well  as  the 
labor  on  this  production  order,  is  charged  up  to  a  controlling 
account  called  **Work  in  Progress,"  where  it  remains  until 
the  entire  production  order  is  completed.  When  the  pro- 
duction order  is  finished,  "Work  in  Progress"  account  is 
credited,  and  "Component  Stores"  is  charged.  Here  the 
item  remains  in  inventory  as  "Component  Stores"  until 
withdrawn  again  for  assembling,  where  it  will  be  charged 
against  "Work  in  Progress"  until  this  assembHng  produc- 
tion order  is  completed,  when  "Work  in  Progress"  will 
again  be  credited  and  "Finished  Stores"  charged.  Here  it 
will  remain  until  sold,  when  "Finished  Stores"  will  be 
credited  and  "Sales"  charged.  In  this  way  the  controlling 
accounts  give  the  summaries  of  perpetual  inventories,  as  it 
can  readily  be  seen  that  at  the  end  of  the  month  any  uncom- 
pleted orders  must  necessarily  be  in  "Work  in  Progress" 
and  all  completed  orders  must  be  in  either  Component  or 
Finished  Stores. 

Now,  it  should  be  borne  in  mind  that  no  items  other  than 
those  processed  by  the  factory  itself  should  be  included  in 
the  classification  of  "Component  Stores"  or  "Finished 
Stores,"  for  if  this  is  done  there  is  no  check  on  inventory 
records  as  related  to  production  orders,  or  no  distribution 

93 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 
94 

of  a  proper  amount  of  overhead  to  production  orders.  There- 
fore  it  is  worth  while  to  say  again  that  such  things  as 
screws,  nails,  bolts,  wire,  or  any  finished  parts  bought  out- 
side, do  not,  under  any  circumstances,  become  identified  with 
component  or  finished  stores  records ;  they  are  simply  C^en- 
eral  Stores."  Even  if  parts  for  a  unit  or  model  of  any  kind 
should  be  bought,  they  would  be  general  stores  until  drawn 
into  the  factory  by  some  production  order,  which  would 
convert  them  into  "Work  in  Progress." 

Component  Stores 

Component  stores  do  not  include  any  component  parts 
or  pieces  in  progress,  and,  until  a  piece  or  part  is  fimshed, 
it  is  still  *'Work  in  Progress."    When,  however,  this  piece 
or  part  is  finished  and  in  such  shape  as  to  be  carried  m  stock 
for    assembling    purposes,    it   then   becomes    "Component 
Stores  "    Therefore,  these  component  stores  bear  no  rela- 
tion to  general  stores  or  to  finished  stores,  simply  bemg  a 
necessary   transformation   convenience    in   accounting    for 
factory  operations.     Component  stores  should  be  directly 
in  charge  of  the  production  department  and  be  replenished 
and  drawn  on  in  accordance  with  instructions  issued  by  this 
department  to  the  factory  for  making  up  finished  umts  or 
models  as  called  for  by  some  schedule  or  schedules. 

As  component  stores  are  the  result  of  having  processed 
certain  pieces  and  parts  on  some  particular  production  order, 
they  must  be  costed  out  on  a  separate  production  order  in 
order  to  get  the  final  cost  of  the  different  units  in  which 

they  may  be  used.  r    .^^      { 

This  method  of  procedure  is  carried  still  further  for 
the  reason  that  costs  must  be  divided  not  only  into  umts, 
but  into  parts  of  units;  and  parts,  into  pieces  and  operations 
on  these  pieces  and  parts.  Therefore,  a  manufacturing  order 
calling  for  the  production  of  any  given  unit  or  number  of 


COMPONENT    AND    FINISHED    STORES 


95 


units  is  converted  into  production  orders  for  the  various 
parts  and  pieces  required. 

The  principal  reason  for  this  procedure  is  on  account  of 
sub-assembly;  one  example  of  which  might  be  the  lock 
mechanism  of  a  rifle.  This  is  composed  of  a  certain  number 
of  pieces,  which,  when  assembled  into  the  lock  mechanism, 
constitute  a  unit,  inasmuch  as  it  can  be  assembled  and  be- 
come operative  independent  of  the  model  upon  which  it 
goes  and,  under  certain  circumstances,  may  be  used  on 
several  models  of  rifles.  Therefore,  the  pieces  that  make  up 
this  part  should  be  assembled  into  it  under  a  production 
order  for  assembling  separate  from  the  one  covering  the 
general  assembly  of  rifles. 

Component  Stores  Record 

The  "Component  Stores  Record"  (Form  13)  is  to 
component  stores  exactly  what  the  "General  Stores  Record" 
is  to  general  stores;  viz.,  a  record  of  all  pieces  and  parts 
processed  in  a  factory,  taken  into  stores,  and  then  delivered 
to  assembly  orders.  It  shows  also  inventory  values  of  com- 
ponent stores  whenever  it  is  necessary  to  have  such  informa- 
tion. The  entries  in  the  component  stores  record  are  similar 
to  those  found  in  the  general  stores  record,  and  likewise  are 
governed  to  a  certain  extent  by  maximum  and  minimum 
amounts. 

To  illustrate  this  point,  if  a  sales  department  were  re- 
quiring, say,  30  engines  a  day  of  a  particular  model,  the 
minimum  inventory  of  that  engine  in  finished  stores  would 
be  determined  by  whatever  length  of  time  it  takes  the  factory 
to  assemble  that  kind  of  an  engine.  If  this  time  wTre  10 
days,  the  minimum  inventory  on  finished  stores  would  be 
300  engines. 

To  go  a  step  further,  if  four  of  a  particular  piece  were 
required  to  an  engine  and  30  days  were  necessary  to  get 


96 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


the  piece  through  the  factory,  then  the  minimum  in  com- 
ponent stores  would  be  four  times  30  for  each  day,  and  for 
'30  days,  30  times  this  number,  or  3,600  pieces.  This  same 
comparison  would  apply  to  all  articles  of  manufacture,  such 
as  rifles  or  similar  weapons,  wherein  a  complete  model  is 
composed  of  an  assembly  of  several  parts,  some  of  which 
are  duplicate  parts. 

When  any  finished  pieces  or  parts  are  received  in  stores 
from  "Work  in  Progress"  in  the  factory,  they  should  always 
be  accompanied  by  a  tracing  tag,  showing  production  order 
number,  lot  number,  and  net  quantity  received.  As  soon  as 
it  is  received  by  the  stores  keeper,  he  should  enter  on  this 
tracing  tag  the  actual  count  of  the  goods  received,  date, 
and  sign  same,  and  then  turn  it  over  to  the  stores  recorder 
who  will  immediately  post  to  his  stores  record  under  "Re- 
ceived" the  quantity  specified,  with  the  order  number  upon 
which  it  has  been  made. 

This  material  will  usually  be  received  in  the  stores  as 
only  a  part  of  some  production  order;  that  is  to  say,  there 
may  be  a  production  order  in  the  factory  for  10,000  pieces, 
and  these  may  come  into  component  stores  in  lots  of  2,000 
or  3,000.  The  entries  for  such  receipts  must  be  made  in  the 
column  captioned  "Received  on  Unfinished  Order,"  for  the 
reason  that  goods  received  in  instalments  in  this  way  have 
not  as  yet  been  costed  out,  and  consequently  must  be  held 
in  this  column  until  the  cost  is  known,  which  will  be  upon 
the  completion  of  the  production  order. 

When  pieces  on  uncompleted  orders  arc  entered  in  the 
column  "Received  on  Unfinished  Orders,"  the  quantity  is 
also  added  to  the  balance  in  the  column  headed  "Balance 
on  Hand— Unfinished  Orders,"  given  on  the  outside.  It 
may  be  that  several  instalments  of  finished  parts  or  units 
will  be  received  into  component  stores  before  the  entire 
order  is  completed ;  but,  as  soon  as  the  total  order  and  cost 


COMPONENT    AND    FINISHED    STORES 


97 


of  the  order  is  received,  the  total  quantity  made  on  the 
order  is  extended  to  the  column  "On  Hand — Component 
Stores,"  and  the  cost  price  is  entered  as  above. 

When  the  stores  recorder  receives  a  requisition  calling 
for  component  stores  and  these  have  been  delivered,  he  will 
enter  in  the  "Issued"  column  the  date  of  issue,  order  num- 
ber for  which  the  material  is  to  be  used,  together  with  the 
quantity.  The  amount  is  then  extended  to  "Balance  on 
Hand — Component  Stores"  and  the  inventory  value  is  then 
carried  out  at  once. 

In  the  event  of  its  being  necessary  to  give  out  component 
stores  that  have  been  received  on  an  unfinished  order,  the 
order  number  and  the  quantity  are  entered  in  exactly  the 
same  manner  as  above,  and  the  quantity  is  deducted  from 
the  "Balance  on  Unfinished  Orders,"  as  there  is  no  balance 
in  "Component  Stores";  for,  as  stated  above,  although  the 
goods  may  be  received  into  the  component  stores  department 
in  instalments  from  some  production  order,  they  cannot 
become  "Component  Stores"  as  a  matter  of  record,  but  will 
remain  "Work  in  Progress"  until  the  costs  are  ascertained 
and  closed  out. 

It  may  be  necessary  at  times  to  draw  from  both  "Balance 
in  Component  Stores"  and  "Balance  on  Unfinished  Orders." 
To  illustrate  this,  suppose  a  requisition  calls  for  3,000  parts 
and  there  are  1,000  parts  in  "Balance  in  Component  Stores," 
while  there  are  4,000  in  "Balance  on  Unfinished  Orders." 
Obviously,  all  there  are  of  component  stores,  which  is  1,000, 
will  be  taken,  and  the  difference  must  come  out  of  the  "Bal- 
ance on  Unfinished  Orders";  and,  if  it  becomes  necessary 
to  price  all  that  are  drawn  out,  the  price  for  the  number 
taken  from  the  "Balance  on  Unfinished  Orders"  must  be 
the  last  cost  price,  but  this  should  never  be  resorted  to  except 
for  special  purposes. 

When  costs  of  any  parts  which  are  carried  in  "Balance 


u 


98         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

on  Unfinished  Orders"  are  received,  the  quantity  should 
then  be  transferred  to  "Balance  in  Component  Stores,"  to- 
gether  with  unit  prices,  total  values,  etc. 

Controlling  Account  for  Component  Stores 

In  the  controlling  accounts  of  a  company,  there  should  be 
an  account  which  governs  "Component  Stores";  and  the 
aggregate  inventory  value,  as  shown  by  the  component 
stores  record,  should  at  any  time  practically  agree  with  the 
controlling  account,  from  which  it  will  be  noted  that  a  check 
is  thus  kept  on  the  inventory  from  two  separate  and  inde- 
pendent sources. 

In  first  establishing  any  such  inventory,  conditions  may 
be  met  which  will  make  it  almost  prohibitive  to  maintain  a 
minimum  inventory  on  account  of  the  demand  for  parts  for 
assembling  purposes.  Therefore,  it  may  become  necessary 
to  draw  a  large  part  of  assembling  requirements  from  com- 
ponent stores  on  unfinished  orders. 

In  order  to  maintain  a  controlling  account  properly,  and 
have  the  monthly  balance  sheet  a  true  interpretation  of  in- 
ventory conditions  governing  component  stores,  the  stores 
recorder,  at  the  end  of  each  month,  should  draw  off  from 
his  records  all  parts  issued  from  stores  on  unfinished  orders 
and  enter  the  same  on  the  component  stores  record  in  red  ink 
under  the  column  "Balance  on  Hand — Component  Stores." 
This  red  ink  balance  will  indicate  a  delivery  to  component 
stores,  which,  in  so  far  as  regular  records  are  concerned,  is 
not  yet  recorded  as  received  in  component  stores,  and  will 
not  be  so  recorded  until  the  entire  production  order  is  com- 
pleted.    The  stores  recorder  should  also  draw  off,  at  the 
end  of  each  month,  all  finished  stores  issued  as  unfinished 
orders.     A  memorandum  entry  should  in  both  cases  be 
shown  in  red  ink  on  the  monthly  balance  sheets,  but  must 
not  be  actually  entered  on  the  balance  sheets  of  private 


COMPONENT    AND    FINISHED    STORES 


99 


ledger  accounts,  as  would  be  the  case  where  a  production 
order  was  completed  and  the  entire  cost  charged  to  stores 
and  credited  to  "Work  in  Progress." 

The  purpose  here  is  to  create  temporarily  a  credit  to 
"Work  in  Progress"  of  such  items  as  have  been  used  in 
some  other  form  of  inventory.  Otherwise,  any  units  finished 
on  an  uncompleted  assembly  production  order  that  were 
sold  and  shipped  would  still  be  in  the  "Work  in  Progress" 
inventory,  and  also  in  the  accounts  receivable,  thus  creating 
double  value  on  inventory  as  a  whole  for  such  items. 

What  has  been  said  above  as  regards  unfinished  balance, 
is  absolutely  necessary  in  connection  with  the  keeping  of 
finished  stores ;  but  in  connection  with  component  stores,  the 
regular  form  of  general  stores  record  could  be  used,  by 
sacrificing  accuracy  and  always  using  last  cost  price  obtained 
on  issue  of  any  component  stores,  making  a  new  price  when- 
ever a  production  order  was  closed  out. 

Finished  Stores  Record 

The  keeping  of  this  record  (Form  14)  is  identical  with 
that  of  component  stores,  inasmuch  as  all  the  receipts  from 
production  orders  are  entered  in  the  "Received"  column, 
and  everything  given  out  on  a  shipping  order  (instead  of  a 
requisition  or  a  production  order)  is  entered  under  "Issued." 

In  the  issuing  of  shipping  orders,  two  copies  should 
always  be  given  to  the  shipping  clerk,  one  a  shipping  memo- 
randum, returnable  to  the  accounting  department  for  billing, 
and  the  other  a  shipping  memorandum  to  accompany  the 
shipment  to  the  consignee.  These  are  the  only  papers  he 
should  have  for  the  shipment  of  goods. 

On  the  shipping  memorandum  returnable  to  the  account- 
ing department,  provision  should  be  made  for  the  entry  of 
the  cost  of  all  the  items  shipped  on  finished  stores,  as  these 
figures  are  necessary  for  making  a  sales  analysis. 


I 


CHAPTER    VI 

STORES—SPECIAL   FEATURES 

Illustrating  forms  to  be  used  as  a  check  on 
materials  drawn  against  orders,  and  explain- 
ing in  detail  the  stores  keeper's  responsibili- 
ties in  ordering  goods  made  in  the  factory, 
and  his  procedure  in  disposing  of  returned 

goods. 


CHAPTER    VI 


STORES— SPECIAL   FEATURES 


Assembly  Requisition 

Duplicate  requisitions  are  used  in  requisitioning  ma- 
terial for  assembly  purposes.  One,  a  blue  sheet,  for  the  total 
list  of  material  required  to  cover  specified  lots  on  a  given 
production  order,  will  be  filled  in,  in  the  first  two  colimms 
only,  showing  the  number  of  pieces  or  parts  required,  and 
the  piece  or  part  number,  together  with  the  date  and  pro- 
duction order  or  lot  number  at  the  top.    (See  Form  15.) 

The  assembly  requisition,  filled  in  as  described,  is  turned 
over  to  the  stores  keeper,  who  immediately  proceeds  to  fill 
the  requisition.  Owing  to  low  balances  on  hand  in  stores, 
however,  he  may  frequently  be  unable  to  make  complete 
delivery  of  all  the  parts  called  for.  Therefore,  the  duplicate 
of  the  assembly  requisition,  a  pink  copy,  has  been  pro- 
vided to  take  care  of  these  "Shorts."  As  soon  as  the  stores 
keeper  gets  out  and  delivers  to  the  department  requiring  it, 
what  material  is  available,  he  enters  under  "Delivery"  on  the 
blue  sheet  the  date  and  quantity  delivered.  When  the  sheet 
or  sheets  covered  by  this  requisition  are  thus  filled  out,  the 
stores  keeper  checks  on  the  pink  sheet  the  quantities  of 
each  part  still  undelivered,  as  shown  by  the  blue  sheet. 

The  following  day,  the  pink  sheet  is  gone  over,  the  items 
which  are  undelivered  balanced,  if  possible,  and  delivered; 
any  quantity  so  delivered  will  be  entered  on  the  right  side 
of  the  requisition,  and  the  balance  still  unfilled  will  be  trans- 
ferred to  another  pink  sheet  for  the  third  day.  This  will 
be  carried  on  from  sheet  to  sheet,  from  day  to  day,  until  the 

103 


I04       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

total  assembly  requisition  has  been  completed.  In  this  way, 
the  stores  keeper  is  made  responsible  for  looking  after  the 
complete  filling  of  the  requisition  after  it  has  once  been 
given  to  him  in  its  entirety. 

The  reason  for  this  procedure  is  that  all  requisitions 
must  be  turned  in  to  the  record  clerk  each  day,  so  that  the 
stores  account  may  be  kept  up  to  date,  and  the  distributions 
made  to  production  orders  and  departments,  and  not  held 
up  until  the  full  amounts  of  various  parts  have  been  de- 
livered. 

Production  Order  Distribution  of  Material 

The  production  order  distribution  of  material  (Form 
16)  is  a  new  form  which  has  been  provided  to  take  care  of 
the  distribution  of  material  to  both  production  orders  and 
departments,  and  also  to  give  a  daily  check  on  the  additional 
amount  of  material  allowable  to  be  drawn  on  any  production 
order. 

The  clerk  who  has  charge  of  the  record  should  work 
alongside  the  clerk  in  charge  of  the  general  and  component 
stores  records  in  the  handling  and  posting  of  requisitions 
coming  into  the  stores  keeper's  office.  These  two  clerks 
should  handle  them  jointly,  as  described  hereafter.  A  pro- 
duction order  distribution  of  material  sheet,  or  sheets, 
should  be  opened  for  each  production  order  number,  and 
should  then  be  filed  in  a  binder  in  the  order  of  issue.  The 
stores  clerk  is  provided  with  a  complete  set  of  pieces,  parts, 
and  unit  key  cards,  which  show  in  detail  the  kinds  and 
quantity  of  material  required  to  make  any  one  piece,  part, 
or  unit. 

As  soon  as  the  stores  keeper  receives  his  copy  of  a  pro- 
duction order  from  the  planning  department,  the  production 
record  clerk  immediately  opens  up  a  sheet  for  this  produc- 
tion order  number,  showing  the  quantity  required,  piece 


STORES— SPECIAL    FEATURES 


105 


number,  and  order  number.  He  then  turns  to  his  key  cards 
and  ascertains  the  amount  of  material  required  per  piece, 
and  opens  up  a  column  on  this  distribution  sheet  for  each 
kind  or  size  of  material  required  to  manufacture  the  item 
called  for,  inserting  the  name  of  the  material,  the  total 
requirements  for  the  production  order,  etc.,  and  he  is  then 
ready  to  receive  requisitions  against  the  production  order. 
No  material  whatever  should  be  delivered  until  the  stores 
keeper's  copy  of  the  production  order  has  been  received, 
and  this  production  order  material  distribution  sheet  has 
been  opened. 

This  production  order  distribution  sheet  will  also  answer 
for  the  distribution  of  material  to  departments,  thus  saving 
the  entire  time  previously  taken  in  the  posting  of  requisitions 
to  departments  separate  from  the  production  order.  This 
combination  of  posting  to  production  orders  and  depart- 
ments will  be  accomplished  in  the  following  manner: 

When  the  first  requisition  for  material  chargeable  to  a 
production  order  comes  in  and  is  posted  on  this  production 
order  material  sheet,  the  department  which  draws  the  ma- 
terial should  be  entered  just  above  the  words  "General"  or 
"Semi-Finished  Stores"  (which  is  the  same  as  "Component 
Stores"),  the  classification  of  material  showing  just  below. 
As  each  kind  of  m.aterial  on  any  production  order  will  al- 
ways be  drawn  by  the  same  department,  the  monthly  total 
of  the  material  drawn,  in  any  one  column,  may  be  recapitu- 
lated from  that  column  to  the  "Recapitulation  of  Material 
to  Department."  Thus  the  posting  to  production  orders 
.will  be  all  that  is  necessary  to  get  a  departmental  distribu- 
tion as  well  as  the  classification  of  material  used  by  each 
department. 

Moreover,  it  will  not  be  necessary  to  figure  the  extension 
of  the  individual  requisitions  going  through,  which  will  save 
a  great  deal  of  time.    This  will  be  properly  taken  care  of  by 


I 


I06       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

the  footing  of  these  pages  at  the  end  of  the  month,  when 
closing  the  production  order  for  posting  to  the  production 
and  betterment  order  record ;  that  is,  the  unit  price  will  be 
shown  for  each  requisition  drawn,  but  the  extension  is  made 
on  the  monthly  totr.l  drawn  instead  of  on  each  individual 
requisition. 

These  last  two  features,  the  combining  of  the  depart- 
mental and  classification  of  material  posting  on  the  same 
sheet  with  the  production  order  distribution,  and  the  extend- 
ing of  the  requisitions  only  by  the  monthly  total  drawn,  will 
prove  a  great  saving  of  time  in  the  handling  of  this  record. 
Of  course,  if  the  unit  price  shows  any  change,  it  may  require 
two  or  more  different  extensions  for  the  month,  but,  as  a 
usual  thing,  the  unit  price  will  be  the  same  during  any  one 
month. 


Assembly  Production  Order  Material  Distribution 

The  "Assembly  Production  Order  Material  Distribu- 
tion" form  has  been  provided  to  take  care  of  the  distribution 
of  material  on  assembly  production  orders  in  a  way  similar 
to  that  in  which  the  production  order  distribution  takes  care 
of  the  distribution  of  material  on  production  orders  for 
pieces  and  parts.     (See  Form  17.) 

At  the  time  a  production  order  is  issued  by  the  schedule 
clerk  and  a  lot  is  started,  this  sheet  will  be  typewritten  from 
the  unit  key  cards  by  the  order  department,  it  being  a  copy 
of  the  assembly  requisition.  This  sheet  shows  the  produc- 
tion order  number  and  the  department  number  drawing  the 
material,  the  quantity  required,  part  or  unit  number,  and 
part  or  unit  name.  At  the  time  this  sheet  is  made  out,  the 
first  two  columns  only  are  filled  in,  showing  the  number  of 
pieces  required  of  each  piece  or  part,  and  the  piece  or  part 
number;  it  thus  constitutes  c.  bill  of  material  for  the  lot 
specified  on  the  production  order.    As  soon  as  this  is  made 


STORES-SPECIAL    FEATURES 


107 


out,  the  original  copy,  being  a  requisition,  is  forwarded  to 
the  foreman  of  the  department  who  turns  it  over  to  the  stores 
keeper  as  soon  as  he  is  ready  to  receive  the  material.  The 
assembly  sheet  is  turned  over  to  the  distribution  clerk  in 
the  stores  keeper's  office,  who  inserts  it  in  his  binder  of 
material  distribution  as  an  authorization  to  deliver  the 
quantity  of  goods  specified.  As  assembly  requisitions  and 
the  "Short"  list  of  the  same  are  turned  in  daily  by  the 
stores  keeper,  the  items  delivered  on  them  are  posted  into 
the  four  "Delivered"  columns  on  this  sheet,  each  time  show- 
ing "Date,"  "Quantity  Delivered,"  and  "Unit  Price" ;  this 
entry  being  made  at  the  same  time  that  the  stores  record 
clerk  makes  the  credit  entry  on  the  stores  record,  giving  the 
distribution  clerk  the  unit  price. 

The  extensions  are  not  made  on  these  individual  de- 
liveries, as  this  is  unnecessary,  the  assembly  production 
order  material  distribution  sheet  being  the  first  and  final 
distribution  of  this  material,  both  to  department  and  pro- 
duction order.  The  unit  price  is  provided  in  each  column 
to  cover  cases  where  it  may  have  been  changed  during  the 
life  of  the  production  order. 

When  the  total  pieces  on  any  part  are  delivered,  the  total 
quantity  will  be  extended  in  the  "Total  Quantity"  column, 
and  the  extension  made  and  entered  in  the  "Total  Amount" 
column,  and  the  material  classification  entered  in  the  last 
column.  As  soon  as  the  production  order  is  completed,  this 
form  will  be  closed  out  and  filed  in  the  finished  order  binder, 
after  having  been  extended,  and  the  totals  inserted  on  the 
copy  of  the  production  order,  which  is  turned  in  to  the  dis- 
tribution department. 


Extensions 

All  extensions  on  the  material  issued  on  production 
orders  should  be  made  by  means  of  a  mechanical  calculator 


$ 


lo8      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

at  the  time  the  production  order  is  completed,  thus  saving 
the  time  of  the  clerk,  who  posts  only  the  quantities,  and 
greatly  expediting  the  worh  of  closing  up  production  'ders, 
as  well  as  saving  a  large  amount  of  time  in  har  ''.ing  the 
distribution  of  the  requisitions  through  not  extending  each 
individual  requisition. 

Daily  Report  of  Stores  Balance 

The  stores  record  clerk  should  draw  off,  at  the  close 
of  each  day,  a  recapitulation  of  the  balances  on  hand  of  all 
manufacturing  materials  in  general  stores,  and  of  all  semi- 
finished and  finished  stores.     This  balance  sheet  must  be 
made  out  in  triplicate,  one  copy  being  sent  to  the  works 
manager,  one  copy  to  the  purchasing  agent,  and  one  copy 
to  the  planning  and  production  department.     Eventually, 
when  these  daily  balance  sheets  become  thoroughly  regu- 
lated, the  use  of  the  stores  clerk's  order  described  below  may 
be  done  away  with ;  for  this  balance  sheet  in  the  hands  of 
the  planning  department,  together  with  the  repor':  of  finished 
parts  received  in  stores,  from  tracing  tags,  will  provide 
full  information  as  to  starting  operations  for  the  manufac- 
ture of  the  parts  nearing  minimum,  so  that  the  reaching 
minimum  will  be  readily  anticipated,  and  the  customary 
procedure  of  crying  "Short*'  wiU  become  a  thing  of  the 
past. 

Objects  of  Stores-Keeping 

^  From  the  foregoing  it  can  easily  be  seen  that  four  great 
objects  in  keeping  stores  are : 

1.  To  maintain  a  perpetual  inventory. 

2.  To  prevent  the  use  of  material  without  its  being  ac- 

counted for,  or  without  authorization. 

3.  To  prevent  unnecessary  investment  in  material,  by  a 


STORES-SPEQAL    FEATURES  iqq 

proper  specifying  of  maximum  and  minimum 
amounts. 
4.  The  manufacture  of  materials  on  a  balance  schedule 
basis  in  an  economical  manner,  by  the  working 
together  of  the  order  and  stores  departments. 

Stores  Keeper's  and  Stores  Clerk's  Orders 

As  the  stores  keeper  has  full  control  of  maximum  and 
minimum  amounts  in  stores,  the  responsibility  is  his,  of 
course,  for  maintaining  these  amounts.  In  case  of  general 
stores,  where  the  stock  is  bought,  he  should  make  out  a 
regular  requisition  for  purchase;  but  in  the  case  of  com- 
ponent stores  or  finished  stores,  where  any  maximum  or 
minimum  amounts  have  been  established,  he  should  use  a 
stores  clerk's  order,  as  a  requisition  to  have  such  parts 
made  up ;  and  as  the  maximum  amount  for  any  item  is  an 
authority  for  the  manufacturing  of  such  items  when  it  is 
brought  down  to  minimum,  the  stores  clerk's  order  to  manu- 
facture will  be  turned  over  to  the  order  clerk  for  his  guid- 
ance in  starting  the  work  on  the  parts  required. 

This  order  (Form  18)  is  made  out  in  duplicate  by  the 
stores  clerk ;  one  copy  remains  with  him,  and  the  other  goes 
to  the  schedule  clerk  in  the  production  department.  As  soon 
as  this  is  received,  it  will  be  handled  by  him  in  exactly  the 
Same  way  as  any  other  production  order,  by  the  issuing 
of  the  necessary  production  order  for  the  manufacture  of 
the  item  in  accordance  with  the  production  order  method 
in  use. 

The  rule  governing  the  issuance  of  these  orders  by  the 
stores  clerk  is  that  he  should  never  issue  an  order  (except 
in  special  instances)  until  the  stock  is  reduced  to  the  min- 
imum, and  the  "Amount  on  Hand"  must  always  be  shown 
opposite  the  space  provided  for  in  the  stores  clerk's  order. 
One  order  may  cover  several  different  items,  but  each  item 


ii 


no       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

must  be  covered  by  a  separate  production  order  on  the  part 
of  the  production  department. 

Goods  Returned  Memorandum 

Goods  that  have  been  sent  out  of  a  factory  and  returned, 
cannot  be  taken  back  into  stock  until  some  special  considera- 
tion has  been  given  them.  Therefore,  for  this  purpose,  a 
"Goods  Returned  to  Us  Memorandum"  (Form  19)  has  been 
designed  on  which  may  be  entered  the  receipt  of  all  goods 
of  any  nature  whatsoever  that  are  returned,  whether  they 
are  returned  for  repairs,  non-acceptance,  or  for  any  other 
reason. 

This  form  is  made  out  in  triplicate;  the  white  copy  is 
kept  by  the  receiving  clerk;  the  second  copy  (pink)  is 
immediately  sent  to  the  stores  department;  and  the  third 
copy  (blue)  is  sent  to  the  sales  department.  As  all  goods 
returned  are  usually  a  question  of  sales,  the  sales  depart- 
ment must  first  decide  what  is  to  be  done  with  the  returned 
goods.  It  will  then  write  upon  this  form  such  instruc- 
tions as  its  correspondence  indicates  is  necessary,  whether 
the  returned  goods  are  for  repairs  or  for  acceptance  back 
into  stock.  If  for  repairs,  the  sales  department  immediately 
fills  out  one  of  the  copies  and  forwards  it  to  the  order  depart- 
ment to  make  the  repairs,  entering  the  repair  order  into 
sales  the  same  as  any  other  order.  If  the  goods  are  to  be 
taken  back  into  stock,  the  copy  will  be  so  marked,  and  one 
copy  of  the  receipt  is  returned  to  the  stores  keeper,  who  will 
act  according  to  the  instructions  received  thereon. 

All  information  called  for  on  this  form  must  be  filled 
out  by  the  sales  department  and  shipping  department,  and 
where  a  credit  is  to  be  given  it  must  be  so  stated.  As  soon 
as  all  this  information  has  been  obtained,  the  third  copy 
(blue),  held  by  the  sales  department,  must  be  signed  by  the 
manager  and  sent  to  the  accounting  department. 


STORES— SPECIAL    FEATURES 


III 


If  repairs  are  to  be  made,  the  copy  to  the  shop  super- 
intendent means  that  a  production  order  must  be  made  out 
to  cover  the  repairs;  and  whether  it  is  for  a  customer  or 
to  go  into  stock  must  be  clearly  indicated. 

In  other  words,  the  whole  question  of  returned  goods 
is,  first,  if  they  are  returned  for  repairs  to  be  made  on  them 
for  the  benefit  of  the  customer,  they  must  be  handled  by  the 
sales  department,  as  this  is  either  a  question  of  sales  or  a 
question  of  making  good  some  previous  sale.  On  the  other 
hand,  if  they  are  returned  because  they  are  rejected,  it  is  a 
question  of  sales  cancellation  to  be  followed  by  instructions 
for  disposition.  In  either  case,  one  of  two  things  must 
take  place :  either  they  must  be  repaired  to  be  put  into  per- 
fect salable  condition  again  through  a  production  order 
for  repairs  for  this  particular  item,  or  else  they  must  go 
into  stock  as  finished  stores,  the  original  instructions  for 
which  must  emanate  from  the  sales  department. 

Accounting  for  Goods  Returned 

Returned  goods,  in  this  instance,  means  something  which 
the  company  has  manufactured  and  has  previously  sent  out, 
and  which  has  been  returned  for  some  one  of  many  different 
causes. 

The  goods  may  be  returned  because  they  are  unsatis- 
factory to  the  customer,  perhaps  as  to  quahty,  perhaps  as 
to  time  of  delivery,  or  for  other  reasons.  The  nature  of  the 
return  from  the  customer  will  affect  the  accounting.  If 
the  goods  are  not  in  shape  to  go  back  into  stock,  certain 
repairs  must  be  made  so  as  to  put  them  into  shape  in  order 
to  get  them  back  in  stock.  Now,  it  is  obvious  that  such 
repairs  cannot  be  charged  as  an  additional  cost  to  the  goods ; 
it  is  usually  an  expense  due  to  bad  sales,  or  bad  selling 
policy,  and  in  such  case  should  be  charged  up  as  a  sales 
expense,  inasmuch  as  the  goods,  after  being  put  into  perfect 


I' 


I  i 


H2       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


repair,  must  go  into  finished  stores  at  the  same  price  as 
other  items  of  the  same  nature.  Any  losses  due  to  the  dis- 
satisfied customer  will  then,  nine  times  out  of  ten,  be  a 
direct  charge  to  the  selling  department,  and  not  to  the 
factory  or  to  goods  made  by  the  factory,  unless  they  are 
defective  by  manufacture. 

This  same  rule  also  applies  in  cases  where  the  sales  de- 
partment issues  orders  to  have  manufactured  certain  types 
of  product,  as  for  instance,  engines,  and  for  certain  sales  or 
credit  reasons  these  orders  are  cancelled  or  returned,  and 
these  special  types  of  engines  have  to  be  made  over  into 
other  types.  The  expense  of  rebuilding  these  engines  can- 
not be  considered  as  an  additional  cost  to  the  goods,  being 
due  to  bad  sales  or  credit  policies,  and  must  be  charged  up 
as  a  commercial  expense. 

Again,  goods  are  returned  to  be  repaired  for  a  customer, 
which,  in  a  motorcycle  department,  is  quite  a  general  thing, 
and,  as  the  number  of  machines  put  out  grows,  this  work 
also  grows  rapidly  in  proportion.  In  such  cases,  an  order 
must  be  made  out  to  have  each  particular  article  repaired, 
followed  by  a  production  order  for  use  in  the  factory,  so  that 
all  labor  and  material  for  making  the  repairs  will  be  charged 
up  to  the  original  item,  in  addition  to  which  must  be  charged 
the  prorated  amount  of  general  overhead. 

Other  complications  that  come  into  this  accounting  are 
in  the  nature  of  such  repairs  as  cannot  be  done  in  the  factory 
itself,  but  must  be  sent  out  for  the  customer.  In  such  cases 
the  article  may  be  sent  back  to  the  factory,  or  shipped  direct 
by  the  customer  to  the  place  where  it  is  to  be  repaired,  for 
all  of  which,  special  provisions  must  be  made,  but  not 
primarily  as  is  often  done  in  the  cost  department. 


CHAPTER    VII 

PREPARATION    FOR   THE   HANDLING   OF 

PRODUCTION 

Illustrating  and  describing  in  detail  the  neces- 
sary classification  of  pieces,  parts,  and  units, 
and  their  relation  to  stores,  schedules,  etc. 


1 


m 


¥4 


I 


CHAPTER    VII 


PREPARATION    FOR   THE   HANDLING   OF 

PRODUCTION 

General  Considerations 

In  the  next  few  chapters  the  preparation  necessary  for 
handling  production  on  a  more  or  less  scientific  basis  will 
be  described  in  considerable  detail.  In  no  other  way  could 
the  relation  between  works  management  and  correct  ac- 
counting methods  and  its  dependency  on  them  be  shown  so 
well.  It  also  shows  how  low  costs  of  production  may  be 
obtained  and  maintained. 

To  express  the  whole  matter  briefly,  the  real  purpose  of 
any  manufacturing  concern  should  be  to  get  out  of  invest- 
ment, labor,  and  material  all  that  can  be  obtained  therefrom 
in  the  shape  of  product.  The  few  chapters  devoted  to  the 
handling  of  product  are  brought  in  to  show  its  close  relation- 
ship to  accountancy  and  the  dependency  of  the  one  on  the 
other  for  economical  results.  If  it  were  not  for  this  con- 
sideration, questions  of  shop  practice  would  not  enter  into 
a  work  of  this  character  at  all. 

Analysis  of  Production  Handling 

The  work  of  production  handling  naturally  resolves  it- 
self into  the  following  divisions  and  order  of  arrangement : 

1.  A  standardization  of  the  pieces,  parts,  units,  and 
models  to  be  manufactured,  their  relation  one  to 
another,  and  the  materials  required  for  each. 

lis 


"i 


1'  1 


If 
■I 


I 


Il6       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

2.  A  Standardization  of  the  operations  and  rotation  of 

operation  on  all  pieces,  parts,  units,  models,  etc. 

3.  The  standardizing  and  indexing  of  all  dies,  jigs, 

fixtures,  gages,  etc.,  required  for  same. 

4.  A  balancing  and  grouping  of  the  machine  tool  equip- 

ment so  as  to  show  the  pieces  and  operations  pos- 
sible on  each  machine  or  group  of  machines. 

5.  The  tabulating  of  pieces  and  operations  that  it  is 

possible  to  do  on  each  different  type  of  machine 
tool. 

6.  The  making  of  time  studies  on  all  of  the  operations 

of  each  piece,  and  the  allotting  to  same  of  a  stan- 
dard time  for  doing  the  work  on  each  operation ; 
this  time  to  be  the  basis  for  premium  or  piece- 
work rates  and  for  possible  plant  output. 

7.  The  scheduling  of  sales  requirements  for  the  season's 

output,  and  from  this,  scheduling  the  manufactur- 
ing requirements  on  a  parts  balance  basis  so  as  to 
maintain  a  full  complement  of  parts  and  pieces 
required  for  assembling. 
8.  The  developing  and  installing  of  a  method  for  putting 
production  through  a  factory  on  a  parts  balance 
schedule  basis  so  that  at  all  times  the  entire  plant 
capacity  will  be  under  full  control. 

Utilizing  Plant  Capacity 

One  of  the  most  important  features  in  efficiency  work  is 
the  ascertaining,  developing,  and  utilizing  of  plant  capacity 
to  its  utmost.  To  do  this  there  must  first  be  a  complete 
tabulation  of  all  pieces,  parts,  and  units  that  are  to  be  manu- 
factured (with  material  required),  and  then  the  require- 
ments of  production  handling,  as  outlined  above,  can  be 
carried  out  in  detail. 

Having  established  a  standard  design  for  the  pieces, 


PREPARATION    FOR    HANDLING    PRODUCTION    117 

parts,  and  units  to  be  made,  and  having  made  an  analysis  of 
the  machine  tools  available,  all  of  the  operations  on  each  of 
these  pieces  must  be  standardized  to  determine  with  what 
tools  and  on  what  machines  each  piece  of  work  can  be  done 
to  the  best  advantage.  Everything  is  then  ready  for  making 
time  studies  on  these  operations  and  preparing  for  the 
schedule  of  production.  When  this  schedule  has  been  laid 
out  and  the  whole  proposition  developed  and  standardized, 
then,  and  not  until  then,  may  the  planning  of  production  be 
installed  on  an  economical  basis  and  as  it  should  be  carried 
out ;  thereby  utilizing  the  entire  plant  capacity  and  meeting 
the  predetermined  manufacturing  requirements  as  per 
schedules  of  output. 

One  of  the  great  problems  before  manufacturers  today 
is  to  discover  the  weak  places — the  points  at  which  their 
plants  lack  capacity  to  manufacture  the  volume  of  product 
required  on  a  balanced  basis.  It  must  be  understood  that 
full  plant  capacity  cannot  be  reached  until  its  equipment  is 
developed  to  the  point  where  time  studies  may  be  made  for 
obtaining  data  on  ultimate  capacities.  Undoubtedly,  there 
can  be  an  approximate  estimate  of  what  the  capacity  will  be, 
based  on  the  manufacturer's  machine  tool  rates  of  output, 
but  in  most  lines  of  work  such  estimates  have  been  found, 
in  the  ultimate  analysis  of  time  studies,  so  erroneous  as  to 
necessitate  a  complete  change  in  the  whole  organization  of 
the  plant. 

It  would  seem  that  no  more  profitable  work  could  be 
done  in  any  plant  than  to  establish  for  a  while  a  pace-making 
department  for  all  pieces  and  parts  to  be  manufactured. 
This  should  be  done  in  order  to  obtain  machine  capacity, 
man  capacity,  plant  capacity,  and  time  limits,  with  a  rate- 
setting  based  upon  these.  It  also  enables  the  determination 
of  the  necessary  operations  with  rotations  of  same. 

The  compiling  of  data  from  which  this  information  may 


|ii 


II 


Il8       UNIFIED    ACCOUNTING  '  FOR    INDUSTRIALS 

be  obtained  is  most  valuable  work,  as  it  shows  not  only  the 
points  which  need  building  up  in  equipment,  but  also,  if  ad- 
ditional equipment  is  not  put  in,  what  finished  or  partly 
finished  parts  must  be  bought  outside,  in  order  to  let  the 
departments  of  greater  capacity  work  up  to  their  maximum. 
The  condition  of  any  plant  in  which  this  work  is  under- 
taken is  usually  such  as  to  require  considerable  time  for  the 
compiling  and  analyzing  of  the  complete  data  of  its  capacity, 
but  when  once  this  is  done,  the  manufacturer  will  have  a 
control  of  production  which  very  few  executives  enjoy 
today.  Although  the  executive  control  which  this  standard- 
ization work  gives  is  very  desirable  and  necessary,  the  prime 
reason  for  such  standardization  i:  to  obtain  a  radical  reduc- 
tion in  the  cos: 3  of  manufacture,  due  first  to  the  greatly  in- 
creased efficiency  of  the  plant  from  a  machine  point  of  view, 
and  second,  to  the  very  material  increase  of  output  which 
can  be  obtained  from  the  plant  with  less  expenditure  for 
labor. 

Production  and  the  Sales  Department 

In  order  to  manufacture  economically  it  is  necessary  to 
put  the  entire  production  of  a  factory  on  a  schedule  basis, 
by  first  determining  what  the  sales  requirements  will  be  for 
a  manufacturing  year  or  season.  It  is  also  vi'  illy  essential 
for  economical  manufacture  that  these  schedules  be  made  to 
protect  manufacturing  conditions. 

It  is  a  common  practice  with  many  manufacturers  today 
to  run  the  manufacturing  end  of  their  business  to  suit  the 
sales  end ;  so  much  so  that  when  special  features  ar :  desired 
by  the  sales  department,  the  factory  immediately  proceeds 
to  furnish  them.  What  is  needed  above  all  else  is  to  develop 
and  introduce  ''parts  common  to  all"  practice,  and,  having 
furnished  the  selling  end  with  standard  articles  which  the 
trade  requires,  it  is  up  to  the  3ales  force  to  sell  these  articles 


PREPARATION    FOR    HANDLING    PRODUCTION 


119 


and  not  make  the  factory  its  tool  in  catering  to  the  whims 
of  individual  customers. 

In  most  scrap  piles  today  there  are  many  thousands  of 
dollars'  worth  of  pieces  and  parts  which  have  been  scrapped 
because  they  were  made  up  as  special  features  to  suit  indi- 
vidual customers  with  apparent  disregard  of  the  amount  to 
be  ultimately  used.  As  a  result,  when  the  particular  cus- 
tomer's orders  came  to  a  stop,  there  was  on  hand  a  large 
number  of  these  special  parts  which  the  selling  department 
was  unable  to  sell  and  which  could  therefore  only  be 
scrapped. 

In  other  instances,  large  amounts  of  scrap  have  been 
produced  by  adopting  new  designs  for  certain  pieces  and 
parts  with  absolute  disregard  of  the  quantity  of  old  pieces 
and  parts  on  hand  at  the  time  of  their  adoption.  Obviously, 
this  should  be  avoided. 

Schedule  of  Production 

While,  of  course,  manufacturing  schedules  must  be  made 
out  in  accordance  with  the  sales  requirements  as  a  whole 
and  the  ability  of  the  sales  department  to  dispose  of  the 
product,  these  matters  must  be  gone  over  in  advance  and  the 
production  schedule  made  up  in  accordance  and  with  regard 
to  factory  capacity.  Then,  with  this  schedule  at  the  maxi- 
mum, all  new  features  should  be  reserved  for  the  following 
season's  models  and  special  features  eliminated  to  the  great- 
est extent  possible. 

It  is  obvious  that  before  scheduling  of  production  can 
be  carried  out  with  any  efficiency,  it  is  necessary  to  know 
exactly  what  there  is  with  which  to  turn  out  production,  and 
to  have  proper  methods  laid  out  for  performing  the  opera- 
tions required.  It  has  been  found  in  many  cases,  by  actual 
observation,  that  one  operation  is  often  done  in  half  a  dozen 
different  ways,  each  one  more  or  less  extravagant  in  the 


m 


II  i 


120       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

method  of  handling  the  material  and  labor  involved.  It  is, 
therefore,  essential  that  there  should  be  established  standard 
methods  for  the  manufacture  of  each  article,  and  instruc- 
tions be  on  record  as  to  how  and  in  what  rotation  the  vari- 
ous operations  should  be  performed.  The  accuracy  of  the 
work  depends  largely  upon  its  being  done  in  the  proper  rota- 
tion. Theoretically  this  should  not  be  so,  but  in  practice 
a  considerable  amount  of  scrap  is  accumulated  in  many 
plants  because  of  operations  being  put  through  in  wrong 
succession. 

To  meet  this  condition,  the  first  consideration  is  the 
tabulating  of  articles  to  be  made,  for  which  there  have  been 
provided  "Piece  Key  Cards,''  'Tart  Key  Cards,"  and  "Unit 
Key  Cards"  (Forms  20-22).  Too  much  care  cannot  be 
given  to  this  all-important  starting  work,  for  upon  the  cor- 
rectness of  the  information  on  the  piece,  part,  and  unit 
key  cards  depends  the  efficiency  of  the  work  of  the  purchas- 
ing department,  the  stores  keeper,  the  production  depart- 
ment, and  the  cost  accounting  department.  The  division  of 
any  unit  into  pieces  or  parts  by  operations  should  be  done  in 
the  drafting  »oom  and  shown  on  the  drawings  and  bills  of 
material  going  therefrom,  and  each  piece  or  part  of  any 
unit  to  be  manufactured  must  be  given  a  number  to  dis- 
tinguish it  from  all  of  the  other  parts  and  pieces. 

System  of  Numbering 

There  are  a  number  of  short-cut  methods  of  joining  and 
classifying  the  numbers  of  units,  pieces,  and  parts,  keying 
all  pieces  and  parts  into  their  respective  units.  In  most 
factories,  however,  pieces  and  parts  are  already  numbered, 
and  where  drawings  of  these  pieces  and  parts  are  correlated 
it  would  not  ahvays  be  practicable  to  change  the  numbers, 
especially  where  repair  parts  have  been  catalogued  by 
number. 


PREPARATION    FOR    HANDLING    PRODUCTION     121 

In  the  numbering  of  articles  manufactured,  an  efYort 
should  be  made  to  give  group  numbers ;  for  instance,  pieces, 
from  1  to  3000 ;  parts,  from  3000  to  5000 ;  units,  from  5000 
up.  Sufficient  provision  should  be  made  for  the  various 
sizes  of  standard  screws,  bolts,  nuts,  etc.,  and,  so  far  as  pos- 
sible, all  special  features  should  also  be  numbered  in  a  group 
and  filed  separately  from  standard  items  so  that  a  check 
can  be  kept  on  them,  and  so  that  they  can  be  gone  over 
frequently  by  the  management.  Any  additions  to  these 
special  features  should  be  reported  to  the  management  from 
time  to  time.  This  is  because  of  the  danger  of  extending 
special  features  into  too  great  a  variety,  and  also  because  of 
the  tendency  on  the  part  of  the  designing  department  and 
factory  management  to  develop  new  features  and  apply  them 
while  the  company  has  a  large  stock  of  designs  on  hand 
which  should  not  be  changed  until  the  stock  is  exhausted. 
Each  special  feature,  of  course,  will  be  a  unit  in  itself  and 
will  be  registered  on  a  unit  key  card  (Form  22),  showing 
all  the  parts  and  pieces  of  which  this  particular  unit  is 
composed. 

Provision  should  also  be  made  for  numbering  the  draw- 
ings and  rough  material  for  any  finished  part,  so  as  to  key 
on  to  the  finished  part.  For  example,  on  a  gasoline  engine 
the  connecting  rod  may  be  No.  20,  and  is  made  from  a  drop 
forging.  As  the  connecting  rod  finished  is  a  component 
part,  it  goes  into  component  stores  as  No.  20.  The  forg- 
ing for  this  also  requires  a  specification,  and  this  forging 
and  its  drawing  number  should  be  No.  20-A,  the  "A"  sig- 
nifying the  rough  material  for  the  finished  part.  However, 
should  this  connecting  rod  at  any  time  be  bought  outside 
in  a  finished  condition,  it  would  come  into  general  stores 
as  No.  20,  instead  of  No.  20-A  which  is  its  distinctive  num- 
ber when  received  as  a  rough  forging. 

As  described  in  Chapter  V,  a  unit  is  an  assembly  of 


I 


122       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

two  or  more  pieces  or  parts  into  a  thing  which  has  a  func- 
tioning power  in  itself  or  is  in  a  condition  for  sale  by  itself 
as  a  complete  article.  Thus,  a  motor  is  a  unit  because  it 
will  deliver  power.  A  transmission  gear  is  a  unit  because 
it  is  a  sales  item.  Units  vary  greatly  in  their  characteristics 
according  to  the  nature  of  the  business  and  its  sales  require- 
ments ;  that  is,  what  would  be  a  unit  in  one  business  might 
be  only  a  part  in  another. 

A  part  consists  of  an  assembly  of  two  or  more  pieces, 
being  in  itself,  as  distinguished  from  a  unit,  devoid  of  any 
functioning  power  or  sales  possibilities  (except  as  repairs), 
until  connected  or  associated  with  some  other  parts  and 
pieces. 

A  piece  is  distinguished  from  a  unit  and  a  part  as  being 
inactive  and  inoperative ;  at  the  same  time  it  is  individual  in 
its  character. 

Thus,  an  automobile  engine  would  be  a  unit;  the  fan, 
water  pump,  etc.,  would  be  parts;  while  the  fan  blades, 
screws,  bolts,  crank  shaft,  cam  shaft,  etc.,  etc.,  would  be 
pieces. 

A  part  should  be  such  an  assembly  of  pieces  as  can  and 
will  be  made  up  and  put  into  component  stores  ready  to 
be  drawn  out  and  assembled  into  a  complete  engine  with 
other  parts  and  pieces.  It  should  be  noted  that  it  is  possible 
for  large  and  primary  units  to  be  composed  of  several 
smaller  or  secondary  units  as  well  as  parts  and  pieces.  Thus, 
a  tractor,  which  would  be  a  unit,  would  include  a  secondary 
unit,  the  engine,  besides  the  various  parts,  such  as  frames, 
wheels,  etc.,  and  the  separate  pieces,  such  as  screws,  nuts, 
bolts,  etc. 

Piece  Key  Card 

This  card  is  written  up  for  each  piece,  and,  as  will  be 
noted  in  Form  20,  shows  the  piece  name  and  number,  draw- 


PREPARATION    FOR    HANDLING    PRODUCTION 


123 


ing  number,  pattern  number,  the  size  of  the  lot  to  be  put 
through,  dimensions  of  the  stock  from  which  it  is  to  be  cut, 
kind  of  material  used,  and  amount  of  material  required  for 
one  piece  or  one  hundred,  the  average  weight,  rough  or 
finished,  the  average  weight  of  scrap  produced,  and  the 
pieces  for  which  waste  cuts  can  be  used.  It  also  gives  the 
name  and  letter  of  the  operation  or  operations,  the  machine 
and  department  in  which  the  work  is  to  be  done,  and  a  list 
of  the  parts  and  units  using  this  piece. 

If  a  piece  is  to  be  used  only  for  an  assembly  into  parts, 
the  number  of  pieces  required  for  each  part  and  the  part 
number  will  be  shown  in  the  column  "Used  on  Sub-Assem- 
bly"; and  the  total  number  used  on  each  unit  is  extended 
in  the  column,  "Used  on  Units."  For  example,  four  of 
piece  1000  may  be  required  on  part  3500,  and  then  in  turn, 
four  of  part  3500  are  required  on  unit  5000.  Therefore, 
the  card  will  read:  "4  used  on  part  3500";  "16  used  on 
unit  5000."  If,  however,  these  pieces  are  used  exclusively 
in  the  final  assembly  of  a  unit,  without  previously  having 
been  assembled  into  a  part,  they  will  be  entered  in  the 
column,  "Used  on  Final  Assembly,"  thus  meaning  that  they 
are  attached  to  certain  pieces  on  the  final  assembly.  That  is, 
piece  1550  may  be  used  only  for  the  final  assembly ;  one  will 
be  attached  to  piece  1600,  two  to  piece  1601,  and  three  to 
1602,  all  entered  in  this  column;  and  then,  in  the  column 
"Total  Used  on  Units"  will  be  entered,  "6  used  on  unit 
5001." 

It  is  possible  that  a  piece  may  be  attached  to  different 
pieces  on  different  units,  in  which  case  the  pieces  to  which 
it  is  attached  will  be  bracketed,  showing  the  unit  to  which 
they  apply.  It  may  also  occur  that  a  certain  piece  may  be 
used  on  an  assembly  into  a  part  and  required  also  for  use 
on  the  final  assembly  of  these  parts  into  a  unit.  This  should 
then  be  entered  on  the  card  as  follows : 


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124       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

"4  used  on  part  3000  (four  parts  used  on  the  unit)  ; 
2  assembled  to  piece  50;  3  assembled  to  piece  65" 
(making  a  total  of  21,  used  on  unit  5002). 

The  complete  file  of  piece  key  cards  must  also  contain 
for  each  particular  complete  unit  manufactured  a  separate 
card  for  each  piece  bought,  and  these  cards  should  be 
stamped  "Bought"  with  a  rubber  stamp,  so  that  the  stores- 
keeper  can  immediately  know  that  such  a  piece  is  bought 
in  the  open  market  and  not  made  in  the  factory.  In  case 
certain  pieces  which  are  usually  manufactured  are  occasion- 
ally bought,  the  cards  for  these  will  not  be  marked  in  this 
way,  but  they  will  be  shown  in  the  Stores  account  as  "Pieces 
Ready  for  Assembling"  and  not  as  "Raw  Material"  with 
the  letter  "A"  following. 

These  cards  are,  as  the  name  implies,  used  to  furnish  a 
key  to  the  materials  and  operations  required  to  produce 
some  piece  or  part  of  any  given  unit,  together  with  informa- 
tion as  to  the  different  units  on  which  the  piece  or  part 
may  be  used,  and  the  different  parts  on  which  the  pieces  are 
required. 

Part  Key  Card 

This  card  (Form  21)  furnishes  a  complete  list  of  the 
pieces  which  may  be  drawn  from  stores  and  assembled  into 
parts  which  in  their  turn  may  be  used  for  the  final  assembly 
of  a  unit.  It  gives  the  part  name  and  number,  as  well  as 
drawing  number,  and  size  of  lot  best  handled  through  all 
operations,  and  it  shows  the  various  unit  numbers  on  which 
this  part  will  be  used,  and  the  number  of  parts  required  on 
each  of  these  units.  It  also  contains  the  number  and  name 
of  each  of  the  operations  of  assembling.  The  operation 
should  be  designated  by  a  letter  instead  of  a  figure,  as  opera- 
tions carry  letters,  and  rotations  on  the  operation,  numbers ; 


PREPARATION    FOR    HANDLING    PRODUCTION 


125 


I 


and  as  the  operation  letter  serves  also  as  a  key  on  the  work- 
man's production  ticket,  the  use  of  a  figure  would  be 
confusing.  The  card  should  show  the  department  in  which 
each  operation  is  done,  and  the  piece  numbers  and  the  num- 
ber of  pieces  required. 

After  the  pieces  going  into  the  part  have  been  ascer- 
tained, they  should  be  entered  on  the  part  key  card  on  the 
blank  line  following  the  name  of  the  operation,  as  opera- 
tion "A,"  that  is,  the  first  line  should  show  the  operation 
number  and  name,  and  on  the  right  half  of  the  card  should 
be  entered,  on  the  same  and  following  lines  if  necessary,  the 
pieces  required  in  the  work  of  this  operation.  Operation 
"B"  should  then  be  entered  on  the  left  side  of  the  card,  on 
the  line  following  the  entry  of  the  last  piece  required  for 
operation  "A."  Then  will  come,  on  the  right-hand  side  of 
the  card,  any  additional  pieces  required  by  the  workman  to 
complete  operation  "B,"  "C,"  "D,"  etc.,  thus  giving  a  his- 
tory of  all  operations  (which  are  taken  from  operation  study 
card,  described  in  Chapter  VIII). 

Unit  Key  Card 

The  unit  key  card  (Form  22)  has  been  provided  to  give 
a  complete  list  of  the  pieces  and  parts  required  for  the 
assembly  of  each  unit.  The  unit  number  and  name  are 
given,  as  well  as  the  drawing  number  of  the  unit,  the  num- 
ber of  cards  comprising  the  list  for  this  unit,  and  the  number 
of  each  card  of  the  group.  The  operation  number  and 
name,  and  the  pieces  and  parts  required,  as  well  as  the  de- 
partment in  which  each  operation  is  performed,  are  entered 
on  the  card,  the  same  as  on  the  part  key  cards,  thus  showing 
a  complete  list  of  all  parts  and  all  separate  pieces  which 
are  required  for  the  final  assembly  of  the  unit.  The  parts 
should  be  grouped  on  the  card  and  should  be  specified  as 
parts,  and  the  pieces  as  pieces. 


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126      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Preparation  and  Care  of  Cards 

The  piece,  part,  and  unit  key  cards  should  be  made  out 
by  the  chief  draftsman,  and  one  of  his  assistants  should  be 
delegated  to  keep  all  sets  of  key  cards  up  to  date,  making, 
under  the  chief  draftsman's  instructions,  any  changes  that 
may  become  necessary.     One  set  of  these  cards  should  be 
held  in  the  drafting  room  by  the  chief  draftsman,  filed  in 
rotation  by  the  piece,  part,  or  unit  number.    Two  additional 
sets  should  be  made;  one  for  the  stores  clerk  and  one  for 
the  purchasing  agent.    Each  of  these  sets  should  be  written 
in  different  colored  ink,  so  that  one  set  may  be  readily  dis- 
tinguished from  another,  and  any  transposition  from  one  file 
to  another  detected.     The  chief  draftsman  should  approve 
both  the  master  set  and  the  other  sets  as  made  out.    None 
of  the  entries  on  these  cards  should  ever  Le  changed,  or 
substitutions  made,  except  by  the  chief  draftsman  or  his 
clerk. 

These  additional  sets  of  cards  should  be  filed  in  rotation, 
according  to  number,  the  same  as  the  chief  draftsman's  set, 
but  in  case  at  any  future  time  a  numbering  system  of  pieces 
and  parts  is  introduced  which  will  key  these  pieces  into 
parts  and  units  by  the  numbers  given  them,  then  these  addi- 
tional sets  of  cards  and  an  additional  set  for  the  chief  drafts- 
man also,  should  be  filed  with  the  part  and  unit  cards  as 
guides  to  the  piece  cards.  That  is,  a  unit  card  will  be  placed 
in  the  file,  and  behind  that,  the  first  part  card  which  will  be 
required ;  behind  this  part  card  will  be  all  the  pieces  going 
to  make  up  this  part;  behind  these  will  be  the  next  part 
card  with  all  the  pieces  going  to  make  up  this  part,  and  so 
on.  Behind  the  last  of  the  part  cards  will  be  filed  the  in- 
dividual pieces  used  on  assembly  for  this  unit.  In  this 
same  manner  all  the  other  unit  key  cards,  together  with  their 
various  part  and  piece  key  cards,  will  be  put  into  the 
file. 


PREPARATION    FOR    HANDLING    PRODUCTION    127 

Uses  to  Which  Key  Cards  Are  Applied 

From  key  cards  the  following  data  are  obtained  in  the 
handling  of  production : 

1.  A  list  of  pieces  and  parts  to  be  manufactured,  for 

the  information  of  the  production  department  in 
making  its  study  of  machine  capacity,  operations, 
and  time. 

2.  Information  for  the  purchasing  department  in  mak- 

ing up  a  purchase  schedule  for  the  year,  showing 
quantities  and  date  of  delivery  at  intervals  during 
the  year  to  anticipate  the  requirements  of  the 
manufacturing  schedule. 

3.  Information  for  the  purchasing  agent  as  to  what 

pattern  is  required  to  be  sent  to  the  foundry  for 
casting  any  specified  piece  or  part. 

4.  Information  to  enable  the  stores  keeper  to  make  up 

his  purchase  requisitions  for  material,  as  regards 
kind,  quantity,  and  quality,  and  to  order  in  such 
lengths  and  widths  as  will  most  economically  cut 
to  the  size  required. 

5.  Information  for  the  schedule  department  as  to  the 

number  and  name  of  operations  required  to  pro- 
cess each  specified  piece,  or  to  assemble  each  part 
and  unit ;  the  department  in  which  the  w^ork  is  to 
be  done;  and  the  character  of  the  machine  on 
which  the  work  is  to  be  performed,  so  that  it  can 
fill  in  the  tracing  tag  which  goes  to  the  plant  with 
the  production  order  for  the  first  operation. 

6.  Information  for  the  schedule  department  as  to  the 

amount  and  kind  of  material  required,  so  that  the 
requisition  for  material  can  be  made  out  and  sent 
to  the  department  with  the  tracing  tag  and  pro- 
duction order  for  the  first  operation. 


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128       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 
Drawing  and  Tracing  Card 

Before  a  bill  of  material  can  be  made  up  and  a  system 
for  handling  work  through  the  factory  established,  it  is 
necessary  to  have  a  proper  method  of  classifying  the  hand- 
ling of  drawings,  blue-prints,  and  also  patterns ;  otherwise 
the  piece  and  part  key  cards  cannot  contain  the  full  informa- 
tion called  for.    This  need  is  met  by  a  ''Drawing  and  Trac- 
ing Card"  (Form  23),  which  is  used  in  the  drafting  room, 
not  only  as  an  index  to  all  drawings,  but  also  as  a  record 
of  all  costs  of  making  the  drawings,  whether  in  pencil  or 
ink,  as  a  sketch,  or  for  final  tracing.     The  cost  of  making 
drawings  should  be  obtained  in  the  same  way  as  the  cost 
of  anything  else,  that  is,  by  the  use  of  the  workman's  time 
ticket  and  requisition  for  material. 

The  chief  draftsman  should  have  a  set  of  distribution 
ledger  sheets,  as  described  in  Chapter  XII,  and  should  give 
an  order  number  to  each  drawing  or  set  of  drawings  made. 
He  should  enter  this  number  on  the  distribution  ledger  and 
charge  against  it  all  of  the  labor  and  material  used  to  com- 
plete the  drawing,  the  total  of  which  should  be  placed  on 
the  drawing  and  tracing  card.    In  addition  to  this,  the  card 
will  show  the  disposition  of  the  drawing  after  it  is  com- 
pleted, that  is,  under  what  file  or  number  in  the  cabinet  it 
is  kept,  or  what  use  may  be  made  of  it  otherwise.    On  the 
back  of  the  card  will  be  entered  from  year  to  year,  the  value 
of  the  drawing,  this  constituting  a  perpetual  inventory  of 
the  same.    As  soon  as  any  drawing  becomes  obsolete  or  is 
cancelled,  the  card  must  have  "Cancelled"  written  across 
its  face,  together  with  the  date  of  cancellation,  but  the  card 
must  not,  under  any  circumstances,  be  removed  from  the 
file. 

The  drawing  and  tracing  card  can  also  be  used  for 
recording  negatives  from  which  photographs  are  made,  in 
exactly  the  same  way  as  it  is  used  for  recording  drawings, 


PREPARATION    FOR    HANDLING    PRODUCTION 


129 


but  these  records  of  negatives  should  be  kept  in  a  file  by 
themselves. 

In  making  up  a  file  for  the  drawing  and  tracing  cards, 
it  is  only  necessary  to  file  them  serially ;  that  is,  to  give  each 
card  a  number,  and  file  it  according  to  that  number.  If 
the  number  is  known,  it  is  easy  to  locate  the  drawing  by  this 
number.  In  case  it  is  different  from  the  piece  or  part 
number,  the  drawing  number  can  easily  be  found  on  the 
piece  or  part  key  card,  so  that  there  is  no  necessity  for 
filing  the  drawing  and  tracing  cards  both  numerically  and 
alphabetically  as  is  often  done. 

It  can  be  readily  seen  that  the  drawing  and  tracing 
cards  can  be  easily  located  under  such  a  file,  whether  they 
pertain  to  drawings  of  an  individual  piece  or  part,  or  to 
drawings  of  an  assembly  of  parts,  as  each  unit  card  also 
contains  the  drawing  number  calling  for  the  assembly 
thereof. 

Pattern  Record  Card 

The  pattern  record  card  (Form  24)  is  used  for  making 
a  complete  record  of  individual  patterns,  showing  the  cost 
of  making  them,  and  the  account  to  which  they  were  charged 
after  being  made. 

As  a  general  thing,  patterns  are  an  asset  to  a  company, 
except  where  they  are  made  for  some  particular  customer 
and  charged  to  him,  or  where  they  become  a  part  of  the 
work  in  a  contract  covered  by  some  sales  order  number. 
Also,  in  ordering  castings,  making  changes  in  designs,  etc., 
it  is  necessary  to  have  a  record  of  the  patterns  used  and 
available.  Therefore,  it  is  very  necessary  that  correct 
records  of  patterns  be  made. 

If  a  new  pattern,  or  a  pattern  covering  a  change  in  de- 
sign, is  made  in  the  factory,  it  will  be  made  over  a  better- 
ment order  number,  the  same  as  any  other  betterment  item  ; 


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130       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

while,  of  course,  if  it  is  made  by  an  outside  pattern  maker, 
it  goes  into  general  stores  and  is  issued  and  charged  out  as 
a  plant  betterment. 

Great  care  must  be  taken  in  making  pattern  charges,  as 
sometimes  the  pattern  must  be  charged  to  some  production 
order  which  is  a  combination  of  several  production  orders ; 
or  again,  to  a  repair  order  to  cover  some  repair  or  replace- 
ment, instead  of  a  betterment  order  for  a  new  pattern.  If, 
however,  it  is  a  pattern  which  is  to  be  used  regularly,  the 
record  must  always  show  the  capital  account  number  to 
which  it  is  charged,  this  information  being  furnished  by  the 
accounting  department.  Further,  the  pattern  record  card 
must  always  show  the  loft  number,  aisle  number  in  loft,  and 
shelf  number  in  aisle  on  which  the  pattern  is  regularly  kept 
in  storage,  so  that,  when  taken  out  and  sent  to  the  foundry, 
it  will  always  be  put  in  its  proper  place  on  its  return. 

In  commencing  a  pattern  record  it  is,  of  course,  impos- 
sible to  obtain  all  the  "Pattern  Data  and  Costs"  in  items  as 
called  for  on  the  cards,  the  total  cost  only  being  given  as 
taken  from  the  inventory ;  but,  in  every  instance,  the  draw- 
ing number,  flask  number,  flask  size,  and  follow  board 
should  be  given,  so  that  information  concerning  all  these 
items  will  always  be  immediately  available. 

Great  care  should  be  used  in  writing  up  the  pattern 
record  at  the  start,  if  not  taken  from  inventory,  to  see  that 
all  patterns  owned  by  a  company  in  its  own  plant  or  in 
other  foundries  are  included  on  these  cards. 

In  filing  the  pattern  record  cards,  there  must  be,  of 
course,  a  set  filed  numerically,  according  to  the  number  of 

the  pattern. 

Separate  cards  should  be  made  out  for  the  patterns  of 
special  tools  and  jigs,  and  these  are  also  filed  by  the  key 
number,  which  identifies  the  pattern  with  the  piece  or  part 
for  which  it  is  to  be  used;  the  patterns  being  numbered 


PREPARATION    FOR    HANDLING    PRODUCTION    131 

1,  2,  3,  etc.,  when  used  on  the  same  jig.  As  the  jigs  are 
numbered  according  to  the  part  number  requiring  same, 
with  a  letter  added—" A,"  "B,"  "C,"  etc.— the  second 
pattern  number  for  the  second  tool  for  part  No.  1500  will 
be  No.  1500-B2. 

Pattern  Location  Card 

In  order  to  keep  a  record  of  the  location  of  patterns 
when  they  have  been  taken  out  of  the  regular  place  of  stor- 
age, it  is  necessary  to  provide  "Pattern  Location  Cards" 
(Form  25),  on  which  will  be  placed  the  number  of  the  pat- 
tern, date  on  which  it  was  sent  out,  and  the  concern  to  which 
it  was  sent.  This  card  must  be  placed  immediately  back  of 
the  regular  pattern  record  card.  It  can  be  used  for  a  long 
period  of  time,  inasmuch  as  it  is  a  running  record.  For 
instance,  the  pattern  may  be  sent  on  a  certain  date  to  a  cer- 
tain factory,  and  the  date  and  name  of  factory  are  entered 
on  the  card.  When  the  pattern  comes  back,  the  date  is  put 
on  the  card,  and  "Pattern  Loft"  is  marked  under  "Loca- 
tion," which  means  that  the  pattern  is  in  its  regular  place 
of  storage.  When  it  is  sent  out  again,  the  information  neces- 
sary to  locate  it  is  placed  on  the  same  card,  and  so  on  until 
the  last  line  of  the  card  is  used  up,  so  that  at  a  glance  it  may 
always  be  known  where  the  particular  pattern  is  located. 


CHAPTER    VIII 

ANALYZING  AND   GROUPING   MACHINE 
TOOL   EQUIPMENT 


A  description  of  the  methods  employed  in 

measuring  up  plant  capacity  and  in  obtaining 

a  balance  on  equipment  and  men. 


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CHAPTER    VIII 

ANALYZING   AND    GROUPING   MACHINE 
TOOL   EQUIPMENT 


Machine  Study  Card 

In  making  a  study  and  analysis  of  the  machinery  and 
tools  available  for  manufacturing  a  complete  product,  the 
first  step  is  to  make  up  a  list  of  all  the  machines  in  the  plant, 
group  or  chart  them  by  size,  capacities,  and  possibilities, 
and,  after  this  is  done,  make  an  analysis  of  the  pieces  and 
parts  and  operations  possible  on  these  groups  of  machines. 
For  this  purpose  the  "Machine  Study  Card"  (Form  26), 
has  been  provided. 

On  this  card  is  to  be  entered  an  analysis  of  all  the 
machines  available  for  manufacturing  purposes.  In  the 
first  place,  it  will  be  necessary  to  number  and  classify  all  the 
machines  in  the  factory.  They  should  be  numbered  from  1 
up,  thus  avoiding  duplication  of  numbers,  but  they  should 
also  have  as  a  prefix  to  this  number,  the  initial  or  initials 
of  the  particular  kind  of  machine,  for  instance,  "D.  P."  for 
drill  press,  "P.  P."  for  punch  press,  "S.  M."  for  screw 
machine,  etc. 

The  machines  having  been  numbered  and  lettered  in  this 
manner,  should  be  grouped  as  to  kinds,  capacities,  sizes, 
equipments,  etc. ;  machines  of  the  same  classification  which 
are  capable  of  the  same  kind  of  work  being  put  in  a  group, 
so  that  drill  presses  of  one  size  and  kind  will  be  in  one  group, 
and  those  of  other  sizes  or  kinds  will  be  in  other  groups  by 
themselves.    Each  group  of  machines  should  be  lettered  in 

135 


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136      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

addition  to  the  initials  of  the  machine  which  forms  the  basis 
of  class.ficat,on ;  thus,  drill  presses  would  be  designated  as 
..    f,r/'    .  °-  P- -  b."  "D-  P.  -  c."  etc.    When  giving 

of  the  machme  should  also  be  given;  but  for  handling  pro- 
duction, the  ,n.tial  and  group  letter  will  be  aU  that  is 
necessary. 

After  this  grouping  has  been  done,  all  the  machines  of 
each  group  should  be  put  on  one  machine  study  card,  and 
a  separate  card  made  out  for  each  individual  machine  not 
ma  group.     The  machine  study  card  will  show  the  type 
and  numbers  of  the  machines  in  the  group,  the  make.  Z 
size,  and  serial  numbers,  as  well  as  the  horse  power  re- 
quired; also  the  location  in  the  plant,  by  buildinj.  section 
and  department.     The  date  and  card  number  wS  also  be 
shown  and  later  the  original  cost  can  be  inserted  if  desired, 
so  that  in  any  consideration  of  the  work  which  is  done 
on  any  machine,  reference  can  be  made  to  its  earning 
capacity  as  compared  with  the  investment  it  represents 
Machine  study  cards  should  be  numbered  in  rotation 

detrctL"''  '>  '  *''  ''''""  °f  ^"y  ^^^^  ^^y  be  readily 
detected,  as  it  is  imperative  that  the  set  be  complete  when 

cTrd  winV"  '"''''?  °'  P'""'  '^P=^"'y-  ^'  the  top  of  the 
card  will  be  given  the  number  of  the  chart  on  which  the 
machines  are  shown. 

on  II  '^'""  u- ''  ^^''''^  *°  ^^^^  ^^^  information  appearing 

that  thri^T  ^'"'^  '"'''  ^^'"'^^^^  '"  ~""-  form  so 
that  the  plant  capacity  can  be  read  at  a  glance  instead 

of  requiring  the  study  of  numerous  statistical  cards     he 

machines  m  each  department  may  be  illustrated  by  a  graphic 

chart  showing  their  capacities,  tools  for  same.  etc.     Thi 

however,  is  something  which  can  be  done  later  just  as  we  i 

^in  ?         ""^  "°'  "^  '°"^  ''  ^'^  '^^  ""less  it  i 
needed  at  once. 


GROUPING    MACHINE    TOOL    EQUIPMENT         137 

As  additional  machinery  is  installed  in  the  plant  from 
time  to  time,  machine  study  cards  should  be  made  out  for 
it,  or,  if  these  machines  are  additions  to  a  group,  the  data 
should  be  inserted  on  the  cards  already  made  out. 

Tool  and  Fixture  Key  Cards 

A  set  of  tool  key  cards  are  as  necessary  for  the  control 
of  production  as  are  key  cards  covering  the  products  made: 
first,  because  it  is  necessary  to  know  what  yield  a  tool  or  a 
set  of  tools  will  give  per  grind  and  per  life  of  the  tool,  so 
that  replacements  can  be  taken  care  of;  second,  so  that  the 
proper  tools  can  be  requisitioned  from  the  tool  cribs  for 
each  set-up  and  for  every  tool  required  for  various  opera- 
tions ;  third  and  most  important  of  all,  so  that  a  proper  cut- 
ting edge  or  point  may  be  maintained  on  all  tools  by  having 
specifications  for  the  amount  of  work  each  tool  shall  be 
allowed  to  do  per  grind. 

The  condition  of  the  cutting  edge  or  point  of  tools  has 
more  to  do  with  both  quantity  and  quality  of  work  than  is 
usually  realized,  and  both  set-up  men  and  machine  adjusters 
should  be  most  carefully  instructed  and  disciplined  in  the 
maintenance  of  such  tools  in  proper  condition.  If  this  is 
not  done,  quantity  and  especially  quality  of  work  will  be 
greatly  lowered,  as  what  is  wanted  is  to  have  the  material 
cleanly  cut,  not  "pushed''  out  of  place.  For  this  reason  it 
is  a  matter  of  great  importance  that  all  tools  shall  be 
properly  cared  for. 

Unless  grinding  specifications,  together  with  the  specifi- 
cations for  depth,  width,  and  length  of  cut,  are  carefully 
carried  out,  bad  work  and  a  failure  to  meet  the  schedule  of 
manufacture  will  occur  on  account  of  the  fewer  pieces  made 
and  the  greater  rejection  of  those  that  are  made,  to  say 
nothing  of  the  destructive  effect  on  the  tools  and  fixtures 
themselves. 


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138       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Tool  Key  Card 

This  card  (Form  27)  is  designed  to  make  a  record  of 
what  a  tool  will  do,  and  the  condition  under  which  it  must 
be  used,  and  it  is  highly  important  that  all  of  its  data  be 
faithfully  filled  in.  The  tool  is  given  a  symbol,  and,  if  made 
for  any  particular  set-up,  this  must  also  be  indicated.  In 
addition  to  this,  the  number  of  the  component  for  which  the 
tool  was  designed  is  to  be  given,  followed  by  a  description 
of  the  operation,  not  an  operation  symbol. 

In  many  instances  the  average  number  of  pieces  that  a 
tool  will  make  from  one  grind,  or  as  a  total,  will  have  to 
be  estimated.  Careful  observation  of  the  tool  in  actual  use, 
however,  will  provide  any  corrections  that  may  be  necessary 
on  the  original  estimate.  Such  corrections  based  on  definite 
information  should  be  made  in  order  to  standardize  the 
exact  work  that  the  tool  will  do,  and  in  making  these 
corrections  the  speed,  feed,  and  cut  should  also  be  given  due 
consideration. 

Tool  Set-Up  Key  Card 

In  most  factories,  there  are  a  certain  number  of  opera- 
tions on  automatic  screw  machines,  hand  screw  machines, 
turret  lathes,  etc.,  that  require  a  complement  of  several 
tools,  and  several  different  complements  for  different  opera- 
tions. In  order  to  register  all  this,  the  'Tool  Set-Up  Key 
Card"  (Form  28)  is  provided. 

The  data  filled  in  on  this  card  will  be  obtained  from  the 
tool  key  card  (Form  27),  and  from  the  fixture  and  die 
key  card  (Form  29),  so  that  when  it  is  necessary  to  set 
up  a  job  the  tool  set-up  key  card  can  be  depended  upon  to 
requisition  from  the  tool  crib  or  tool  storage  everything 
that  is  required  for  processing  the  given  operation. 

Undoubtedly,  the  number  of  pieces  per  grind  on  differ- 
ent tools  in  a  set-up  will  vary;  therefore,  the  time  periods 


GROUPING    MACHINE    TOOL    EQUIPMENT         139 

that  will  be  allowed  for  changing  tools  must  be  based  upon 
the  tool  that  has  to  be  ground  most  frequently. 

On  the  tool  set-up  key  card,  under  the  caption  "Opera- 
tion" must  be  given  a  description  of  what  the  operation  is ; 
not  its  s)mibol. 

Fixture  and  Die  Key  Card 

This  card  (Form  29)  is  used  in  connection  with  the  two 
foregoing  cards,  to  record  the  necessary  fixtures  and  dies 
that  may  be  required  for  an  operation,  either  in  conjunction 
with  the  tool  set-up,  or  on  an  independent  piece  for  some 
particular  operation. 

From  the  foregoing  descriptions,  the  relation  of  the  three 
tool  and  fixture  cards  can  be  easily  understood,  as  well  as 
their  use.  It  is  to  be  borne  in  mind  that  these  cards  are 
not  purposed  to  be  used  in  connection  with  the  manufacture 
of  tools,  or  for  inventory  purposes,  but  solely  in  connection 
with  the  use  of  the  tools. 

Operation  Studies 

In  organizing  the  work  of  a  production  department,  the 
operations  required  in  producing  the  various  pieces,  parts, 
and  units  must  be  filled  in  direct  on  the  piece,  part 
and  unit  key  cards  (Forms  20-22)  by  the  drafting  or 
engineering  department.  When  this  is  done,  the  production 
department  should  make  a  careful  study  of  operation  per- 
formances in  the  factory.  As  a  result  of  these  studies,  it  is 
frequently  found  that  many  operations,  or  the  machines 
and  tools  employed  on  them,  can  be  rearranged  or  combined 
in  such  a  way  that  the  work  can  be  done  more  economically 

and  rapidly. 

In  analyzing  an  operation,  there  are  two  separate  and 
distinct  considerations,  the  one  relating  to  the  method  of 
procedure,  the  other  to  the  time  required  to  do  the  work. 


140       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


GROUPING    MACHINE    TOOL    EQUIPMENT         141 


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This  necessitates  a  mechanical  or  operation  study  for  estab- 
lishing standards,  and  a  time  study  for  establishing  costs. 
Taking  up  the  time  study,  there  are  two  ways  in  which 
such  a  study  may  be  conducted:   one  which  treats  the 
operation  as  a  whole  as  illustrated  on  the  "Operation  Study 
Card"   (Form  30),  including  the  total  net  time  required 
without  considering  the  time  needed  for  the  rotations  or 
motions  made  on  the  operation,  and  another  method  which 
takes  up,  in  connection  with  the  foregoing,  the  rotations 
of  the  operation  and  also  the  motions  made  by  the  operator, 
as  shown  on  the  "Motion  Study  Card**  (Form  31).    The 
practicability  of  either  method  depends  altogether  upon  the 
nature  of  the  work  and  the  conditions  under  which  it  is 
done.    Short  runs  and  a  constant  change  of  work  make  the 
latter  method  impracticable,  whereas  long  runs  on  individual 
pieces   and   operations   make   it   not   only   desirable   but 
necessary. 

Operation  Study  Card 

In  order  to  determine  the  operating  eflficiency  of  a  plant, 
it  is  necessary  to  make  complete  studies  of  all  operations 
required  on  pieces  and  parts,  and  for  this  purpose  operation 
study  cards  (Form  30)  are  provided.  These  cards,  and 
also  the  motion  study  cards  discussed  later  in  the  present 
chapter,  are  intended  to  be  used  on  study  boards  made  to 
hold  several  cards,  so  that  the  man  making  observations 
can  carry  them  conveniently  from  machine  to  machine  and 
make  his  notations  on  them.  After  the  operation  study 
has  been  taken  on  the  card,  the  information  obtained  is 
transferred  to  the  operation  key  card  (Form  33),  which  is 
designed  for  constant  use  in  the  production  department  in 
making  out  time  tickets  and  routing  the  work  through  the 
factory. 

On  the  operation  study  card  is  given  the  piece  number 


and  name,  and  when  the  card  is  finished  and  brought  into 
the  production  department,  it  should  be  given  a  study  num- 
ber, these  numbers  being  given  in  rotation  as  the  cards  are 
received.  In  case  a  study  is  taken  to  supersede  a  former 
study,  the  study  number  that  it  supersedes  is  shown;  and 
when  this  card  is  superseded  by  another  in  its  turn,  the 
number  of  the  new  card  will  be  shown  on  the  superseded 
card  so  that  any  study  card  will  show  the  number  of  any 
preceding  or  subsequent  study. 

One  of  the  objects  in  making  the  study  of  an  operation  is 
to  determine  the  size  of  the  lot  best  handled  in  performing 
that  operation,  so  that  when  the  study  of  all  the  operations 
is  completed,  the  size  of  the  lot  which  can  be  put  through 
and  handled  to  best  advantage  for  any  operation  can  be 
known  at  once  by  reference  to  the  study  card.  To  illus- 
trate, on  a  job  started  on  an  automatic  machine,  the  pieces 
on  the  first  operation  may  be  turned  out  at  the  rate  of  1,000 
a  day,  this  being  a  convenient-sized  lot  for  the  automatic 
machine ;  however,  when  the  next  operation  in  the  machine 
department  is  reached,  an  average  day's  work  on  a  hand 
screw  machine  may  be  only  200.  Again,  it  may  happen 
that  for  some  of  the  following  operations  a  still  smaller  lot 
would  be  found  advantageous.  To  avoid  delay  and  to  enable 
the  work  to  be  pushed  through  with  the  proper  rapidity,  it 
would  perhaps  be  better  to  put  through  lots  from  the  first 
operation  of,  say,  100,  instead  of  1,000,  as  work  upon  such 
a  large  quantity  would  hold  up  and  delay  subsequent 
operations. 

In  order  to  handle  production  on  schedule  and  with  a 
knowledge  of  just  what  is  being  made,  and  to  facilitate 
routing,  costing,  inspecting,  etc.,  in  the  factory,  these  lots 
should  be  maintained  in  their  identity  from  the  first  opera- 
tion imtil  they  are  turned  into  stores  as  finished.  There  may 
be  some  occasions  when  it  will  be  necessary  to  split  a  lot. 


H: 


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142       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

but  this  should  be  done  only  in  a  very  great  emergency,  and 
when  done,  each  split  lot  should  be  tagged  as  "Part  of  Lot 
No ,  Production  Order  No " 

Making  the  Operation  Study 

A  special  department  may  be  devoted  exclusively  to 
experimental  time  study  and  rate-setting,  or  this  may  be 
one  of  the  functions  of  the  production  department      In 
either  case,  when  the  headings  of  the  operation  study  card 
for  the  piece  to  be  studied  have  been  made  out,  the  person 
having  the  study  in  hand  should  begin  in  the  department 
of  first  operation  and  then  observe  each  operation  in  the 
manufacture  of  this  piece  in  sequence,  using  one  card  for 
each  operation,  and  making  such  changes  in  the  manner 
in  which  the  work  is  done  as  he  finds  necessary  or  econom- 
ical.    He  enters  upon  the  card  the  operation  number  and 
the  description  of  the  operation.    This  description  will  be  a 
general  term,  as  "Mill,"  "Drill,"  "Turn,"  but  in  addition 
the  rotations  or  steps  of  each  operation  must  be  given    Thus 
operation  "A"  might  be  "Turn,"  but  this  turning,  to  be 
earned  out  to  the  best  advantage,  should  be  done  on  the 
lathe  in  a  certain  order  or  rotation,  rotation  1  being  "Rough 
Turn  Outside";  rotation  2,  "Finish  Outside";  rotation  3. 
Bore   ;  rotation  4,  "Ream";  rotation  5,  "Face  Top";  rota- 
tion 6,  "Finish  Inside";  rotation  7,  "Face  Bottom";  etc 
The  rotation  of  each  operation  should  be  carefully  studied 
and,  when  once  decided,  the  workmen  should  follow  these 
rotations  implicitly  in  the  order  given;  for  if  in  the  case 
above  bormg  and  reaming  were  done  first  and  the  turning 
and  finishing  of  the  outside  afterwards,  it  might  throw 
the  piece  out  of  alignment  and  make  the  operation  un- 
satisfactory. 

..ci'l'"^"^  instances  rejections  have  been  reduced  50  to 
65%  by  a  careful  study  of  the  rotations  of  operations.    The 


GROUPING    MACHINE    TOOL    EQUIPMENT         143 

importance  of  a  proper  rotation  of  operations  cannot  be 
overestimated. 

For  each  operation  the  machine  number  and  depart- 
ment number  should  be  inserted  on  the  operation  study 
card;  also  the  feed,  speed,  and  cut  of  the  machine  best 
suited,  as  well  as  the  fixtures  and  tools  required,  thus 
furnishing  by  operations  a  complete  history  for  each  piece 
as  it  goes  through  the  factory  together  with  its  routing  from 
machine  to  machine  and  department  to  department,  from 
the  first  operation  to  the  last. 

When  the  operation  study  on  a  piece  is  completed,  the 
operation  study  card  should  be  signed  by  the  person  taking 
the  study  and  be  turned  in  to  the  production  department. 
Here  the  data  contained  on  it  is  transferred  to  the  operation 
key  card  (Form  33),  and  from  this  card  entered  on  the 
piece  key  card  (Form  20),  thus  completing  the  information 
on  this  latter  card  which  is  used  chiefly  by  the  planning 
clerk.  The  entry  of  this  information  does  not,  however, 
complete  the  data  for  the  operation  key  card  which  is  used 
by  the  planning  clerk,  as  the  time  allowance,  time  study 
number,  and  wage  rate  are  yet  to  be  entered. 

In  a  great  many  cases  it  will  doubtless  be  found  that 
different  workmen  have  different  methods  of  doing  the 
same  work,  and  while  there  is  a  general  standard  for  the 
operation,  yet  there  is  a  great  deal  of  variance  from  this 
for  no  good  reason.  It  is,  therefore,  a  first  essential  to 
standardize  these  operations  as  they  are  gone  over.  The 
man  delegated  to  this  work  may  find  that  changes  in  tools, 
fixtures,  or  speed  of  machine,  or  feed,  will  be  desirable  in 
increasing  the  output  of  the  piece,  and  he  should  be  given 
full  authority  to  make  such  changes  as  seem  to  him  advisable, 
after  going  over  the  matter  with  the  workmen,  foreman, 
and  other  persons  interested. 

The  result  of  this  careful  study  of  each  piece  made,  fre- 


BES8K»Bi1tBiaaig'5!jS~ 


144       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

quently  develops  material  economies  in  operations,  together 
with  much  greater  general  efficiency  and  a  correspondingly 
increased  output. 

When  operations  have  thus  been  standardized,  a  com- 
plete history  is  obtained  of  all  work  done  in  the  factory,  of 
all  machines  available  for  this  work,  and  of  all  tools  with 
which  it  may  be  done. 

Motion  Study  Card 

In  order  to  take  the  detail  of  time  required  for  opera- 
tions, a  "Motion  Study  Card"  (Form  31)  is  provided,  and 
one  of  these  cards  is  used  for  each  operation  on  any  given 
piece  which  requires  scientific  analysis.  A  motion  study 
card  should  be  made  out  in  full  detail  in  the  factory  from 
simply  observing  the  operation,  but  should  get  its  first  data 
in  the  production  department  from  the  operation  study  card 
(Form  30),  so  that  the  basis  of  the  study  and  the  motion 
data  shown  on  it  will  be  exactly  the  same  as  the  instructions 
to  the  workmen  for  processing  the  piece,  for  which  the 
operation  study  card  is  the  authority. 

The  piece  number  and  name,  operation  number  and 
name,  and  operation  study  number  are  taken  from  the  opera- 
tion study  card,  together  with  the  machine  number  and  de- 
partment number  in  which  the  study  is  made,  and  all  this 
is  inserted  at  the  top  of  the  motion  study  card,  and  the 
operator's  number  and  name  will  be  filled  in  after  going 
to  the  department.  The  speed  and  feed,  as  well  as  the 
fixtures  required,  must  be  given  for  each  operation.  Then 
the  study  man  will  watch  the  operator  set  up  the  job,  taking 
the  time  of  same  with  his  stop-watch,  time  him  at  least  four 
times  on  each  rotation,  and  also  time  him  on  taking  down 
the  job.  The  number  of  pieces  made  will  then  be  inserted 
in  the  column  following,  and  the  average  time  for  each 
piece  in  the  next  column. 


GROUPING    MACHINE    TOOL    EQUIPMENT         14- 

The  motion  study  as  now  completed  is  available  for 
several  purposes :  first,  for  the  ascertaining  of  labor  require- 
ments ;  second,  for  the  scheduling  of  labor  needed ;  and  third, 
as  a  basis  for  piece  or  premium  work. 

The  motion  study  card  shown  in  Form  31  has  been  filled 
in  with  data  taken  from  an  actual  time  study.  The  details 
of  this  study  as  presented  are  practically  self-explanatory, 
it  being  understood  that  all  figures  of  time  made  are  shown 
in  tenths  of  an  hour.  These  time  studies  cover  all  the  rota- 
tions of  one  operation. 

In  order  to  illustrate  further  the  method  of  procedure  in 
taking  time,  the  motions  to  these  operations,  showing  the 
use  of  both  the  left  and  right  hand,  are  given  in  Form  32. 
This  illustrates  what  time  and  motion  studies  mean  if  gone 
into  in  detail.  In  actual  practice  this  data  should  appear  on 
the  motion  study  card  which  should  be  printed  on  both 
sides;  one  side  for  operation  rotation  data,  the  other  for 
motion  study. 

When  the  motion  study  is  complete,  and  the  results  are 
entered  on  the  motion  study  card,  the  card  will  be  signed 
by  the  person  taking  the  study  and  turned  in  to  the  produc- 
tion department.  Here  the  time  allowance  will  be  set,  with 
the  high  rate  and  low  rate  of  earnings  possible  under  it, 
any  further  remarks  being  entered  in  the  last  colum.n,  if 
necessary. 

In  setting  the  time  allowance,  consideration  should  be 
given  to  the  fact  that  a  motion  study  is  usually  taken  under 
conditions  of  high  tension;  that  the  employee  is  supposed  to 
be  working  at  more  than  ordinary  speed ;  and  that  in  most 
cases  it  would  not  be  possible  for  a  man  to  average  this 
speed  all  day.  Therefore,  a  time  allowance  should  be  made 
for  a  longer  period  than  that  actually  observed.  This,  of 
course,  will  have  to  depend  somewhat  upon  the  nature  of 
the  work,  the  manner  in  which  it  is  handled  with  regard  to 


146 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


tools,  etc.  In  case  the  operator  should  be  required  to  set 
up  the  tools  on  his  machine,  or  to  leave  the  machine  to 
get  tools  or  materials,  the  time  consumed  in  this  should  not 
be  included  in  the  time  allowance. 

Before  leaving  the  subject  of  motion  study,  a  word  of 
caution  should  be  inserted  here.  Detailed  procedure  such  as 
that  described  is  not  adapted  to  every  kind  of  business,  or 
to  every  article  made.  Good  judgment  is  required  to  know 
to  what  extent  the  methods  suggested  should  be  adopted  in 
actual  practice.  The  fine  detail  illustrated  here  should  be 
applied  only  on  work  which  is  done  on  a  large  scale  of 
duplication ;  for  instance,  if  a  man  and  machine  are  put  on 
one  piece  of  work  for  days  and  weeks  at  a  time,  this  nicety 
of  detail  would  be  of  great  value;  but  if  it  is  work  that 
changes  from  day  to  day,  or  has  short  runs,  this  detail  is 
nearly  always  expensive  rather  than  economical. 

Another  caution  in  connection  with  work  of  this  char- 
acter relates  to  the  character  of  the  labor  employed.  Unless 
there  is  reasonable  stability  among  the  operators,  there  is 
not  much  profit  in  educating  them  to  the  motion  studies 
illustrated.  If,  for  instance,  in  a  factory  operating  2,000 
men,  4,000  or  5,000  men  are  hired  annually,  the  educational 
work  required  to  carry  out  the  detail  of  time  and  operation 
studies  would  cost  far  more  than  the  savings  made. 

Operation  Key  Card 

This  card  (Form  33)  will  show  the  history  of  each 
operation  as  required  by  its  captions,  its  data  being  as  taken 
from  actual  observation,  or  as  changed  to  correspond  with 
the  operation  and  motion  study  cards.  The  operation  key 
card  is  for  the  use  of  the  planning  clerk  in  planning  work 
for  the  factory  and  in  making  out  tracing  tags  and  work- 
men's production  orders.  He  should  have  on  his  desk  a 
complete  file  of  these  operation  key  cards  in  the  order  of 


GROUPING    MACHINE    TOOL    EQUIPMENT         147 

their  piece  number,  and  of  the  various  operations  required 
for  each  piece.  It  is  evident,  from  the  purpose  for  which 
these  cards  are  used,  that  any  changes  made  in  the  opera- 
tions must  also  be  noted  on  this  card,  so  that  it  will  cor- 
respond with  the  operation  study  card  by  which  the  changes 
were  authorized. 

Owing  to  defective  material  or  for  some  other  reason, 
it  will,  from  time  to  time,  be  necessary  to  make  an  extra 
operation  on  some  pieces;  and  in  such  a  case,  during  the 
time  this  extra  operation  is  required,  a  pencil  notation  of 
the  extra  operation  should  be  made  on  the  operation  key 
card  between  the  others,  as  operation  "A-j^,"  "B-J^,"  etc. 

In  explanation  of  the  operation  key  card,  it  will  be  noted 
that  the  data  as  to  the  tools  and  fixtures  required  are  taken 
from  the  tool  key  card  and  fixture  key  card,  and  that  data 
as  to  the  speed,  feed,  cuts,  and  lubricants  are  taken  from  the 
operation  study  card.  The  operation  key  card  is  thus  made 
to  contain  complete  information  for  making  out  time  tickets 
and  instructions  to  workmen  not  only  for  doing  the  pro- 
cessing work,  but  for  the  rotation  work  as  well.  Further, 
this  card  has  full  instructions  thereon  as  to  time  allowed 
and  the  wage  rate  paid. 

Rate  Memo 

After  all  time  study  work  is  done,  a  rate  memo  (Form 
34)  should  be  made  out  by  the  experimental  or  time  study 
department  in  accordance  with  its  findings,  for  each  and 
every  operation.  On  this  slip  or  card  appears  definite  in- 
formation as  regards  the  conditions  under  which  the  opera- 
tion was  tested  out,  and  adjustments  must  be  made  on  fac- 
tory equipment  to  meet  the  requirements  as  to  speeds,  feeds, 
cuts,  etc.,  of  the  rate  memo. 

The  rate  memo,  as  it  comes  from  operation  and  time 
study  work,  only  shows  at  what  rate  work  may  be  done 


II 


148      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

per  hour  or  per  period  of  eight  hours.  The  price  for  doing 
the  work  must  come  from  the  superintendent  or  from  a 
wage  board,  and  be  based  on  the  fact  that  piece-workers  or 
premium  workers  should  earn  anywhere  from  20%  to  30% 
more  than  they  would  have  earned  on  a  day-work  basis. 
If  milling  machine  hands,  for  instance,  are  demanding  $3 
a  day,  they  should  be  allowed  to  earn  about  $4  per  day  on 
piece-work  or  premium  work.  Therefore,  the  number  of 
pieces  that  can  be  done  in  eight  hours,  divided  into  $4,  is 
the  approximate  rate  which  should  be  set. 

This  form  is  made  out  in  quadruplicate ;  one  copy  of 
which  is  sent  to  the  accounting  department  to  check  time 
and  also  to  make  the  required  postings  from  the  rate  memo 
to  the  rate  cards.  The  second  copy  is  sent  to  the  department 
doing  the  work,  as  a  notification  to  the  foreman  of  the  rate. 
The  third  copy  is  for  the  files  of  the  superintendent  con- 
trolling the  department  in  which  the  work  is  done.  The 
fourth  copy  (white  cardboard)  is  kept  in  the  reference  files 
of  the  experimental  or  time  study  department. 


. 


CHAPTER    IX 

SCHEDULES 

Manufacturing  schedules,  covering  labor,  ma- 
terial, and  finances,  and  a  consideration  of  the 
relation  of  these  schedules  to  each  other. 


CHAPTER    IX 


SCHEDULES 


Purpose  and  Scope  of  Schedules 

In  order  to  standardize  production  in  any  plant  and 
handle  it  so  as  to  give  constant  and  full  information  as  to 
manufacturing  conditions  and  results,  and  at  the  same  time 
yield  a  maximum  output  for  the  investment  made,  it  is 
necessary  to  put  all  work  through  the  factory  on  a  schedule 
basis,  planning  it  ahead  and  purchasing  all  materials  accord- 
ingly. It  is  thus,  and  thus  only,  that  assembling  depart- 
ments can  be  assured  regular  and  sufficient  quantities  of 
material  to  maintain  a  constant  delivery  of  finished  product. 

Of  course,  scheduling  the  production  for  a  factory  pre- 
supposes definite  knowledge  concerning  the  equipment  of 
the  various  departments,  together  with  standard  data  as  to 
the  various  pieces,  parts,  and  units  to  be  made,  as  set  forth 
in  Chapters  VII,  VIII.  It  must,  however,  be  understood 
that  scheduling  means  much  more  than  the  mere  systematic 
adjustment  of  all  this  to  the  items  required  for  such  manu- 
facture. It  means  the  scheduling  of  material  to  be  purchased, 
together  with  the  delivery  dates  of  same;  a  scheduling 
of  the  labor  required,  and,  finally,  a  scheduling  of  the 
moneys  required  to  finance  these  purchases  of  labor  and 
material.  In  other  words,  the  superintendent  or  works 
manager  of  the  plant  will  make  up,  from  the  data  supplied, 
a  schedule  of  labor  requirements  showing  the  number  of 
men  needed  based  on  the  number  of  man-hours  required 
to  do  the  work,  without  regard  to  cost.     The  purchasing 

151 


152 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


SCHEDULES 


153 


agent  will  make  up  a  schedule  of  material  requirements  by 
kind,  quantity,  and  deliveries,  irrespective  of  money  values; 
while  the  treasurer  will  make  up  a  schedule  of  financial 
requirements  for  labor,  material,  and  general  expenses. 

Manufacturing  Order — Master  Schedule 

The  first  consideration  in  arranging  the  systematic 
operation  of  a  plant  is  the  output  of  each  model  and  unit 
required  for  each  manufacturing  year,  together  with  the 
weekly  or  monthly  requirements  as  to  deliveries.  Such  a 
specification  constitutes  a  manufacturing  order  and  this 
order  must  necessarily  be  O  K'd  by  the  proper  executive, 
usually  the  general  manager,  before  it  becomes  effective, 
after  which  it  is  to  be  passed  to  the  production  engineer  and 
superintendents  for  scheduling  and  manufacturing  the 
pieces,  parts,  and  assemblies  required. 

This  primary  manufacturing  order  will  in  reality  be  a 
schedule  of  sales  requirements;  that  is,  it  will  indicate  the 
deliveries  of  the  factory  as  required  by  the  sales  department, 
divided  into  weeks,  months,  etc.,  for  some  definite  time 
period  (usually  a  year).  This  information  can  be  tabulated 
on  a  schedule  sheet  similar  to  that  illustrated  by  Form  35, 
which  therefore  becomes  a  "Master  Schedule." 

These  master  schedule  manufacturing  orders  should  be 
numbered  in  rotation,  and  one  made  for  each  different  model 
and  unit  required.  When  the  production  engineer  receives 
such  a  manufacturing  order,  he  should  issue  production 
schedules  to  show  exactly  what  the  factory  must  produce 
each  week  and  month  of  the  year  in  order  that  this  output 

may  be  maintained. 

In  case  of  changes  in  the  manufacturing  or  sales  policy 
of  the  company  during  the  year,  other  manufacturing  orders 
must  necessarily  be  issued  to  cover  these  changes.  It  should 
be  borne  in  mind,  however,  that  not  only  deliveries  but 


/  \ 


also  purchases  must  be  made  in  accordance  with  the  original 
schedule,  so  that  any  change  made  in  the  manufacturing 
schedule  will  affect  the  kind  and  quantity  of  material 
purchased. 

Production  Schedule 

The  master  schedule  calls  for  the  total  output  of  each 
model  or  unit;  the  production  schedule  (Form  36)  provides 
for  the  parts  and  pieces  of  the  models  or  units  called  for 
by  the  master  schedule.  As  soon  as  a  master  schedule  for 
a  completed  unit  or  model  has  been  issued,  a  separate  pro- 
duction schedule  should  be  made  out  for  each  part  and  piece 
required  by  the  master  schedule.  The  manufacturing  order 
number  appearing  at  the  top  should  be  that  of  the  master 
schedule,  and  the  total  requirements  for  each  and  every 
piece  and  part  should  be  shown  on  the  production  schedules. 

On  the  production  schedule,  the  spaces  marked  "On 
Hand"  and  "Balance  to  Schedule"  should  be  filled  out  only 
when  a  very  excessive  amount  of  parts  and  pieces  is  on 
hand,  as  this  information  is  really  meant  for  use  at  an 
inventory  adjustment  period.  Under  ordinary  conditions, 
the  stock  on  hand  should  be  relied  upon  for  repairs,  etc., 
and  does  not  enter  into  the  making  up  of  a  schedule. 

The  rate  per  day  or  week  at  which  each  piece  must  be 
manufactured  should  be  shown  on  the  production  schedule, 
together  with  the  date  that  the  schedule  begins  and  ends, 
and  the  number  of  days  it  has  to  run. 

In  making  up  the  schedule  sheet  for  each  piece,  "Total 
Requirements"  will  be  ascertained  by  reference  to  the  piece, 
part,  and  unit  key  cards  (Forms  20-22).  The  piece  key 
cards  should  be  gone  over  consecutively,  as  they  will  show 
all  the  units  and  parts  for  which  the  piece  is  required,  and 
the  total  number  of  pieces  needed  for  the  units  specified 
in  the  master  schedule  can  be  readily  determined  and  shown 


154 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


on  the  production  schedule.  For  instance,  if  in  September, 
50  of  model  ''Roadster"  are  required,  40  of  model  "Road 
Racer,"  60  of  model  "Juvenile,"  and  30  of  model  "Jobbing" 
(making  a  total  of  180  models),  on  all  of  which  three  of  a 
certain  piece  are  required,  the  schedule  of  this  piece  for 
that  month  would  be  three  times  180,  or  540.  This  opera- 
tion is  repeated  for  each  of  the  succeeding  months,  to  cover 
the  requirements  of  all  the  units  or  models  using  this  piece. 

This  again  illustrates  very  clearly  the  desirability  of  the 
"Parts  Common  to  All"  plan  of  manufacturing,  in  which 
everything  is  done  on  a  pieces  and  parts  basis,  all  the 
scheduling,  planning,  and  costing  work  being  shaped  to  this 
end,  rather  than  by  the  "Complete  Unit"  plan,  and  it  need 
hardly  be  said  that  a  system  of  manufacturing  upon  a  basis 
of  merely  keeping  machine  equipment  busy  regardless  of 
delivery  requirements  is  wholly  undesirable. 

To  this  end,  the  schedule  of  each  piece  should  indicate 
the  total  number  required  for  all  units  and  models  before 
the  manufacturing  orders  and  production  schedules  can 
be  converted  into  production  orders  (Form  40).  When 
this  plan  is  followed,  each  piece  will  be  manufactured  as  a 
standard  piece  to  be  used  on  different  units,  and  conse- 
quently each  piece  can  be  used  without  regard  to  which 
particular  unit  has  the  greatest  sale,  provided  the  number 
of  units  in  the  aggregate  is  up  to  expectations.  Therefore, 
it  is  perfectly  safe  to  manufacture  such  a  piece  in  a  dull 
season  and  so  give  the  factory  a  constant  load  factor;  at 
the  same  time  there  is  an  opportunity  to  manufacture 
in  quantities  sufficiently  large  to  obtain  a  low  cost  of 
production. 

One  of  the  important  considerations  from  a  cost  point 
of  view  is  the  number  of  pieces  and  parts  called  for  at  one 
time  or  in  a  given  production  order.  With  sales  rapidly 
increasing  or  decreasing,  it  may  be  a  difficult  matter  to 


SCHEDULES 


155 


handle  the  manufacture  of  certain  pieces  or  parts  in  the 
quantities  called  for  and  at  the  same  time  obtain  the  lowest 
cost  of  production.  In  such  cases  it  may  be  that  such 
quantities   can  be  bought   cheaper   outside  in   a  finished 

condition. 

For  instance,  in  the  manufacture  of  a  certain  piece  the 
total  requirements  for  a  season  might  be  2,000.  Manu- 
factured in  this  quantity  the  cost  of  production  may  be 
greater  than  this  piece  could  be  bought  for  outside.  On 
the  other  hand,  if  6,000  of  these  pieces  were  manufactured 
at  a  time,  the  cost  of  production  might  be  considerably  less 
than  they  could  be  purchased  for  outside.  But  6,000  would 
be  a  three  years'  supply  and  the  interest  on  such  an  invest- 
ment would  probably  be  greater  than  the  saving  effected. 
There  is  also  the  danger  of  obsolescence.  The  necessity  is 
therefore  apparent  of  closely  watching  all  of  these  factors, 
particularly  when  pieces  or  parts  are  run  in  small  batches 
from  time  to  time,  or  in  a  small  quantity  made  up  for  a 
whole  season's  requirements. 

While,  of  course,  the  manufacturing  order  shows  the 
actual  sales  delivery  requirements  from  month  to  month, 
it  is  not  often  that  the  pieces  or  parts  required  are  manu- 
factured at  exactly  this  monthly  rate,  as  this  would  mean 
anything  but  a  constant  load  in  the  factory.     On  the  con- 
trary, a  production  schedule  controlled  by  manufacturing 
orders  should  be  laid  out  for  such  quantities  as  can  be 
made  most  economically,  and  in  some  cases  a  year's  supply 
might  be  made  up  at  one  time,  but  in  so  doing  machine 
equipment  is  released  during  a  subsequent  period  for  the 
manufacture  of  other  pieces,  which,  if  this  practice  was  not 
resorted  to,  might  be  far  behind  schedule,  thereby  holding 
up  the  complete  assembly  of  units  and  models. 

The  production  schedule  having  been  completely  planned, 
is  then  ready  for  processing  operations  in  the  factory,  but 


156       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

before  taking  this  up,  the  scheduling  of  labor,  material,  and 
financial  requirements  must  be  considered. 

Purchase  Order  Schedule 

The  scheduling  of  material  requirements  is  just  as  im- 
portant as  is  the  schedule  of  manufacturing  requirements, 
for  upon  obtaining  the  right  quantities  of  material  at  the 
right  time  all  factory  operations  depend. 

The  purchasing  agent  having  been  furnished  with  a 
duplicate  of  the  production  schedules  by  months,  will  obtain 
from  his  set  of  the  piece,  part,  and  unit  key  cards  (Forms 
20-22)  the  exact  kinds  and  quantities  of  material  required. 
He  will  then  make  out  a  schedule  sheet  (Form  37)  for  each 
kind  of  material,  either  by  months  or  any  other  time  periods 
in  accordance  with  the  general  purchasing  policy.  This 
sheet  also  shows  the  requirements  as  to  delivery  dates  and 

payments. 

When  making  out  these  schedules,  the  purchasing  agent 
should  go  over  his  piece  and  part  key  cards  in  much  the 
same  manner  as  the  production  engineer  does,  and  make  a 
list  from  these  key  cards  of  the  quantity  of  material  re- 
quired each  month  for  the  number  of  pieces  and  parts  shown 
in  the  manufacturing  schedule.  When  all  pieces  and  parts 
requiring  any  particular  kind  and  size  of  material  have 
been  gone  over,  the  total  quantity  is  entered  on  the  pur- 
chase order  schedule  (Form  37)  as  the  total  requirements 
for  that  kind  of  material.  This  is  then  divided  into  time 
periods,  under  the  column  headed  "Schedule."  The  require- 
ments for  succeeding  months  or  periods  are  figured  out  in 

the  same  way. 

As  soon  as  purchase  order  schedules  are  made  out,  the 
purchasing  agent  should  issue  his  purchase  orders  for  de- 
liveries of  material  according  to  his  schedules.  (See  Form 
4.)     The  order  number,  date,  and  quantity  ordered  must 


SCHEDULES 


157 


be  entered  in  the  "Purchase  Orders  Issued"  column  of  the 
purchase  order  schedule. 

The  purchase  orders  should  require  delivery  of  material 
at  the  factory  at  least  six  weeks  before  the  date  required 
by  the  production  schedules.  This  is  necessary  because  the 
production  schedule  is  for  completed  pieces  and  parts.  The 
manufacture  of  pieces  and  parts,  in  most  cases,  should  begin 
thirty  days  earlier,  and  beyond  this  some  allowance  must 
be  made  for  delays  in  delivery.  An  addition  of  at  least 
10%  should  be  made  to  the  material  requirements  of  the 
production  schedules  as  an  allowance  for  spoilage  and 
repair  parts. 

As  soon  as  the  purchasing  agent  receives  a  "Material 
Receipt  and  Notice"  (Form  6)  from  the  receiving  clerk, 
he  will  turn  to  the  purchase  order  schedule  showing  this 
material  and  enter  the  quantity  thus  received  under  the 
column  "Received,"  carrying  his  cumulative  totals  forward 
from  time  to  time  and  showing  the  number  of  days  ahead  or 
behind  schedule.  This  enables  the  purchasing  agent  to  keep 
a  full  check  on  all  materials  coming  in  and  on  material  which 
is  overdue,  thus  helping  to  bring  about  prompt  delivery  of 
all  materials  and  preventing  delay  in  the  work  of  the 
factory. 

When  the  purchasing  agent  issues  purchase  orders  direct 
from  the  purchase  order  schedule  without  a  purchase 
requisition,  the  stores  clerk  will  enter  the  quantity  ordered 
on  his  stores  record  (Form  9),  taking  this  from  his  copy  of 
the  purchase  order  at  the  time  the  order  is  posted,  just  as 
if  a  purchase  requisition  had  been  issued.  His  record  will 
thus  show  (when  stores  "Reserves"  against  production 
orders  issued  are  entered)  the  amount  of  material  that  can 
be  depended  upon  as  available  for  further  production  orders 
for  any  given  period. 


158       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Scheduling  Labor 

The  question  of  scheduling  labor  requirements  may  be 
considered  at  this  point.  The  superintendent,  or  works 
manager,  having  been  furnished  with  a  copy  of  the  manu- 
facturing schedule  of  each  piece  and  part,  will  be  able  to 
estimate  his  labor  requirements,  by  figuring  out  the  man- 
hours  required  to  do  the  work. 

From  the  analysis  of  plant  capacity  (Chapter  VII)  it 
will  be  possible  to  lay  out  a  general  policy  for  employing 
help  and  make  provisions  for  securing  it  whenever  it  is 
required. 

If,  according  to  the  analysis  of  plant  capacity,  it  is 
found  that  the  manufacturing  schedule  calls  for  more  output 
than  the  machine  or  possible  m^an  capacity  warrants,  the 
superintendent  should  at  once  take  the  matter  up  with  the 
purchasing  agent  so  that  he  may  arrange  to  purchase  out- 
side such  parts  as  cannot  be  made  advantageously  in  the 
factory  under  existing  conditions. 

Most  manufacturing  concerns  have  been  in  business 
for  a  considerable  period  of  time  and  have  in  their  pos- 
session data  concerning  costs  and  the  time  required  for 
the  operations  on  each  piece  and  part.  With  a  definite 
schedule  of  daily,  weekly,  and  monthly  requirements,  it  is 
by  no  means  a  difficult  task  to  figure  out  from  the  produc- 
tive labor  costs  just  what  labor  is  required  to  process  any 
given  schedule;  and  as  operations  are  always  confined 
definitely  to  departments,  the  cost  per  department  is  also 
easily  obtained.  For  instance,  if  50  men  are  employed  in  a 
certain  department  to  meet  schedule  requirements  and  the 
pay-roll  shows  that  the  average  wage  is  35  cents  per  hour, 
the  hourly,  daily,  weekly,  and  monthly  costs  of  productive 
labor  for  the  entire  department  can  be  quickly  figured,  as 
well  as  the  man-hours  required  to  do  the  work.  From  this 
data  the  number  of  men  required  for  a  given  amount  of 


SCHEDULES 


159 


J 


work  to  be  done  in  a  definite  period  of  time  can  easily  be 
determined. 

The  amount  of  all  non-productive  labor  employed  in 
the  factory  is  shown  on  the  ''Overhead  Distribution  Sheet" 
(Form  77).  From  this  can  be  obtained  the  non-productive 
labor  costs  of  each  department,  and  the  number  of  men  re- 
quired for  non-productive  work,  by  departments,  and  also 
for  the  factory  in  general. 

To  aid  in  checking  labor  performance,  a  schedule  of 
labor  requirements  may  be  made  out,  or  these  data  may  be 
plotted  on  a  cross-section  chart  and  then  checked  against 
the  actual  performance  from  week  to  week  and  month  to 
month. 

Since  processing  requires  the  combination  of  machines 
and  labor,  the  amount  of  labor  to  be  employed  depends 
upon  the  machine  capacity  available. 

The  time  that  it  will  take  to  get  out  any  schedule  de- 
pends, of  course,  upon  the  number  of  men  utilized.  If  it  is 
desired  to  manufacture  units  or  models  requiring  $50,000 
worth  of  productive  labor,  and  if  the  average  wage  is  $3 
per  day  and  100  men  are  employed  in  processing,  the  num- 
ber of  days  required  to  produce  the  schedule  is  found  by 
dividing  50,000  by  300,  or  166  J^.  In  other  words,  when- 
ever productive  costs  are  known  on  any  item  of  manufac- 
ture, time  periods  for  the  schedule  depend  upon  the  number 
of  men  that  can  be  employed  on  the  w^ork.  Hence,  it  is 
imperative  to  know  exactly  what  the  plant  capacity  is,  as 
discussed  in  Chapters  VII  and  VIII. 

Scheduling  Financial  Requirements 

It  is  the  function  of  the  treasurer  to  provide  for  the 
financial  requirements  of  both  labor  and  material.  Having 
been  furnished  with  copies  of  the  master  schedules  and  also 
having  the  production  schedules  for  pieces  and  parts,  he 


;ii 


l6o       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

will  be  able  to  estimate  the  amount  of  money  required  to 
pay  both  for  labor  and  material  for  the  entire  year,  as 
shown  in  the  following  illustration: 

Supposing  that  a  schedule  calls  for  10,000  of  a  certain 
piece ;  that  according  to  the  time  study  cards  and  operation 
key  cards,  the  total  number  of  man  hours  allowed  for  each  of 
these  pieces  is  five,  and  that  the  average  wage  as  shown  by 
the  time  study  and  operation  cards  is  24  cents  an  hour ;  the 
approximate  labor  cost  of  each  piece  would  then  be  $1.20, 
or  $12,000  for  the  total  quantity  of  10,000  pieces. 

By  going  over  each  piece  and  part  as  specified  on  the 
production  schedule,  the  total  money  required  for  the  pro- 
ductive labor  for  the  year  can  be  easily  computed ;  and  non- 
productive labor  by  departments,  as  shown  on  the  overhead 
distribution  sheet  (Form  77),  can  then  be  anticipated  and 
added  to  these  productive  labor  requirements. 

These  data  should  be  transferred  to  a  graphic  chart  that 
will  show  separately  the  weekly  and  monthly  pay-roll  re- 
quirements (both  productive  and  non-productive),  and  then 
the  actual  pay-roll  should  be  checked  against  it  from  pay 
period  to  pay  period. 

As  soon  as  costs  of  all  pieces  and  all  departments  have 
been  ascertained,  the  amount  of  labor  required  for  any 
schedule  can  be  immediately  determined  and  an  absolute 
check  kept  on  the  factory  in  regard  to  the  use  of  labor. 

A  further  check  on  factory  labor  as  between  productive 
and  non-productive,  and  as  between  the  various  kinds  of 
work  done,  is  described  in  Chapter  XII,  "Distributions." 
So  complete  is  this  check,  that  no  matter  what  the  variation 
is  from  predetermined  labor  requirements,  it  is  possible 
immediately  to  discover  the  department,  the  foreman,  and 
the  individual  operator  responsible  for  the  variation,  and 
the  particular  order  or  piece,  the  cost  of  which  is  affected 
by  this  variation. 


SCHEDULES 


i6i 


When  the  material  deliveries  have  been  scheduled  by 
the  purchasing  agent  (Form  37),  their  quantity,  plus  the 
price,  will  enable  the  treasurer  to  lay  out  his  schedule  for 
financing  the  purchase  of  this  material  according  to  the  time 
periods  shown. 

Importance  of  Schedules 

The  importance  of  these  schedules  relative  to  labor, 
material,  and  financial  requirements  cannot  be  overesti- 
mated Together  with  the  other  data  of  income  and  ex- 
penditure as  shown  in  the  monthly  balance  sheets,  they  will 
give  the  treasurer  definite  information  as  to  financial  re- 
quirements for  long  periods  in  advance  and  often  enable 
him  to  secure  decided  advantages  in  placing  contracts. 
Then  with  these  materials  delivered  according  to  schedule, 
the  factory,  as  already  stated,  is  in  a  position  to  manufacture 
on  the  most  economical  basis  as  regards  both  labor  and 
material,  and  the  production  department  can  be  utilized  to 

its  greatest  efficiency. 

To  sum  up,  the  schedule  method  puts  into  a  manager  s 
hands  a  means  for  predetermining  achievements^the 
results  which  can  be  derived  by  certain  combinations  of 
labor,  material,  equipment,  and  output.  Then,  as  means 
have  been  provided  for  checking  up  these  results  from  day 
to  day,  adjustments  can  be  made  as  they  are  needed,  either 
by  changing  the  schedule  rates  for  men  to  be  employed,  or 
the  quantity  of  material  required,  or  by  an  increased  effort 
in  the  sales  department,  so  as  to  maintain  an  even  factory 
output  with  a  corresponding  uniformity  in  cost  and  conse- 
quent profit  to  the  company. 

Graphic  Charts 

Charts  are  frequently  used  in  connection  with  schedules, 
and  two  of  these  are  shown  in  Forms  38  and  39.    Both  of 


l62       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


SCHEDULES 


163 


these  charts  are  of  an  entirely  new  type,  inasmuch  as  they 
are  a  combination  of  calendar  time  and  numerical  quantities. 
In  a  chart  such  as  Form  38,  to  the  left  of  the  sheet,  space 
is  provided  for  a  vertical  column  of  figures  and,  at  the  top, 
space  is  provided  for  a  horizontal  row  of  figures,  while  the 
main  body  of  the  chart  is  divided  up  vertically  in  calendar 
time  by  months,  weeks,  and  days,  and  horizontally  by  work- 
ing time  of  six  days  to  the  week.  Each  small  square  repre- 
sents a  day  either  vertically  or  horizontally,  and  it  also 
represents  a  number  corresponding  to  whatever  figure  is 
written  in  the  left-hand  column  imder  units,  in  the  same 
sense  that  it  corresponds  to  the  number  at  the  head  of  the 
columns  from  600  to  31,200  inclusive. 

The  component  schedule  illustrated  in  Form  38  is  plotted 
from  a  production  schedule.  The  number  required  cumula- 
tively from  week  to  week  is  shown  by  the  numbers  at  the  top 
of  the  sheet.  The  figures  shown  there  represent  the  number 
of  components  or  pieces  that  are  to  be  processed  and  com- 
pleted within  the  tln:c  periods  indicated  in  the  month,  week, 
and  day  columns.  On  the  left-hand  side  of  the  chart  are 
shown  the  names  and  numbers  of  the  operations  that  are 
to  be  performed  on  the  component  or  pieces  in  question. 

The  straight  oblique  lines  indicate  the  schedule  time 
periods  for  the  complete  processing  of  each  component.  In 
other  words,  between  the  first  operation  and  the  last  opera- 
tion there  is  a  uniform  lime  lag  (including  Sundays)  of 
sixty  days;  that  is,  it  takes  sixty  calendar  days  to  produce 
this  particular  component.  The  finishing  operations  shown 
on  the  chart  in  January  cover  work  begun  at  an  earlier  date 
and  the  first  operations  on  this  component  would  be  shown 
on  the  preceding  chart  commencing  November  1. 

The  heavy  black  lines  are  plotted  against  the  oblique 
lines,  and  show  to  what  extent  the  component  in  its  progress 
is  ahead  or  behind  schedule  requirements.     Beneath  these 


plotted  lines  is  a  line  called  "Component  Stores,"  which 
means  the  same  thing  as  ''pieces  and  parts  stores"  or  "semi- 
finished stores,"  whereby  is  shown  the  number  of  days  the 
component  stores  are  ahead  of  manufacture.  Beneath  the 
component  stores  line  is  a  base  line  which  simply  means 
that,  if  this  line  is  reached,  assembling  will  have  to  be 
stopped  as  there  will  be  nothing  in  component  stores  from 
which  to  draw.  This,  as  shown  by  this  chart,  was  actually 
the  case  in  the  week  ending  February  5. 

The  purpose  of  this  chart  is  to  check  up  from  week  to 
week  or  month  to  month,  as  the  case  may  demand,  the 
various  operations  on  each  component,  and  to  find  out  to 
what  extent  the  factory  is  maintaining  a  uniform  balance  or 
flow  of  product.  To  illustrate  this,  the  week  beginning  July 
1  showed  that  there  was  a  drop-off  on  operation  No.  9.  It 
is  at  a  point  like  this  that  attention  should  be  centered  in 
order  to  move  the  operation  up  to  balance.  It  should  be 
noted  that  all  operations  done  in  the  drop-forging  shops  are 
prefixed  by  the  figure  10,  thus  running  from  101  to  105 
inclusive,  as  at  this  point  the  component  goes  into  temporary 
storage,  and  is  from  here  given  to  the  machine  shops  under 
a  new  production  order  and  lot  number. 

The  chart  illustrated  in  Form  39  shows  the  actual 
unit  requirement  per  week  as  plotted  from  a  master 
schedule ;  the  numbers  in  the  spaces  at  the  top  of  the  sheet 
indicating  the  quantities.  Line  A  is  the  weekly  schedule. 
Line  B  shows  at  a  glance  how  many  days  manufacturing  is 
ahead  of  this  schedule.  To  illustrate,  in  week  ending  Jan- 
uary 15,  the  schedule  was  exactly  two  weeks,  or  12  days, 
ahead  of  manufacture,  while  for  week  ending  May  6,  the 
schedule  was  2  days  behind.  Line  C  shows,  as  per  vertical 
numerical  column,  the  number  of  complete  units  assembled 
each  week,  while  Line  D  shows  the  total  units  that  were 
good.     In  other  words,  the  difference  between  C  and  D  is 


I.: 


l64      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

the  amount  that  was  thrown  out  for  various  reasons.  Line 
E  shows  the  percentage  of  good  units  obtained,  as  per  the 
percentage  column  at  the  right-hand  side  of  the  sheet. 

The  data  represented  by  Hues  F  and  G  are  of  interest 
and  importance.  Line  F,  in  accordance  with  the  column 
numbered  on  the  left  of  the  sheet,  shows  the  number  of  men 
employed  daily,  while  G  shows  the  number  of  units  output 
obtained  per  man.  A  comparison  of  these  lines  may  bring 
out  many  interesting  points.  For  instance,  in  the  week 
ending  February  26  the  number  of  men  employed  was 
2,900  (line  F),  and  of  the  6,000  units  produced,  as  shown 
by  line  C,  only  3,600  units  were  good  (D).  On  the  other 
hand,  in  the  week  ending  November  25,  2,500  men  were 
employed  with  a  total  production  of  6,500  units,  out  of 
which  5,800  units  were  good. 

Turning  to  line  G,  it  is  seen  that  the  output  per  man 
was  lowest  during  the  period  April  8  to  22,  and  highest 
during  the  week  ending  August  12  and  also  from  November 
18  to  25.  This  chart  then  shows  at  a  glance  the  efficiency 
of  the  labor  force  employed  during  a  long  period  of  time 
and  will  no  doubt  prove  of  value  to  the  factory  superin- 
tendent or  manager  of  works. 

Similar  charts  can  be  plotted  so  as  to  show  the  schedule 
for  labor,  material,  and  financial  requirements,  and  the 
actual  performance  can  be  checked  against  these. 


CHAPTER    X 

CONVERTING  LABOR,  MATERIAL,  AND 
EXPENSE   INTO  FINISHED   PRODUCT 

A  method  for  issuing  production  and  other 
orders  to  a  factory  as  a  whole,  and  to  indi- 
vidual workmen,  together  with  various  forms 
of  collecting  the  time  of  employees;  also  an 
illustrated  description  of  planning  methods 
and  of  planning  or  control  boards. 


CHAPTER    X 

CONVERTING    LABOR,    MATERIAL,    AND 
EXPENSE   INTO   FINISHED   PRODUCT 


Classification  of  Orders 

In  the  handling  of  production  orders,  it  is  usually  neces- 
sary to  confine  the  work  to  one  method  of  procedure.  This 
method  is  prescribed  by  a  central  planning  station  which 
directly  controls  all  the  work  throughout  the  factory,  or 
controls  it  through  several  sub-planning  stations.  In  either 
case  the  method  of  procedure  would  be  uniform  throughout 
the  factory,  because  the  sub-planning  stations  are  under  the 
general  control  of  the  central  planning  station.  Also  the 
data  employed  on  the  forms  to  be  used  are  identical.  Which 
method  of  handling  production  orders  is  the  better,  is  a 
question  of  organization  and  beyond  the  scope  of  the  present 
work.  The  consideration  here  is  the  actual  putting  of 
work  through  the  factory,  and  provision  for  all  the  detail 
necessary  thereto. 

It  is  taken  for  granted  that  a  stores  system  has  been 
established  in  such  a  way  as  to  give  a  perpetual  inventory 
of  all  materials  and  supplies  that  the  company  may  buy,  and 
that  this  inventory  is  held  in  a  controlling  account.  Under 
these  conditions,  in  order  to  authorize  the  delivery  of 
material  to  the  factory,  it  is  absolutely  necessary  for  costing 
and  accounting  purposes  to  have  an  order  of  some  kind  to 
which  all  material,  labor,  and  expense  can  be  charged,  and 
these  orders  must  be  known  and  controlled  by  consecutive 
numbers. 

167 


l68      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

To  cover  all  labor,  material,  and  expense  used  in  the 
operations  of  a  factory,  four  different  conditions  must  be 
provided  for,  these  requiring  four  different  kinds  of  orders. 
( See  also  Chapter  IV. ) 

1.  Production  Orders.  These  orders  relate  exclusively 
to  goods  made  for  sale,  where  the  exact  amount  of  labor 
and  material  required  for  production  can  be  charged.  Such 
orders  are  issued  to  cover  whatever  quantity,  kind,  or  size 
of  unit,  piece,  or  part  it  is  desired  to  make  at  any  particular 
time;  and  all  material  drawn  from  stores,  and  the  labor 
used  for  processing  it,  must  be  charged  to  these  production 
orders  as  production  costs.  In  addition  to  this,  a  prorated 
amount  of  overhead  must  be  charged  as  described  in 
Chapter  XII,  "Distributions." 

2.  Betterment  Orders.  These  orders  relate  wholly  to 
such  plant  improvements  as  increase  the  capital  investment 
of  the  company.  Whenever  any  work  is  to  be  done  which 
will  effect  a  plant  betterment,  a  betterment  order  must  be 
issued  therefor  by  the  proper  authority,  and  to  such  order 
must  be  charged  all  of  the  material  drawn  from  stores  for 
use  thereon,  all  of  the  direct  labor  employed  in  its 
execution,  and  a  prorated  amount  of  overhead,  the  same 
rate  as  applied  to  regular  production  orders. 

3.  Repair  Orders.  These  are  orders  issued  for  the 
replacement,  repair,  etc.,  of  buildings  and  equipment,  and 
are  designed  to  take  care  of  all  repair  work  done  for,  or  by, 
various  departments.  To  each  individual  repair  order 
should  be  charged  all  of  the  material  drawn  from  stores 
and  all  of  the  labor  employed;  but  repair. orders  do  not 
bear  any  portion  of  the  general  overhead  charge,  as  repairs 
in  themselves  constitute  a  portion  of  such  charges,  which  in 
turn  are  distributed  to  production  and  betterment  orders. 

4.  Prorating  Orders.  These  orders  are  designed  to 
cover  productive  work  that  is  done  in  bulk  and  prorated 


I 


i 


LABOR,    MATERIAL,    AND    EXPENSE 


169 


over  the  product  made,  such  as  painting,  enameling,  plating 
work,  etc. 

Production  Orders 

Production  orders  authorize  work  to  be  started  in  a 
factory.  A  production  schedule  (Form  36)  for  all  the 
pieces  and  parts  required  having  been  prepared,  the  next 
step  is  to  prepare  and  issue  production  orders  (Form  40). 
This  form  is  provided  in  quadruplicate,  each  copy  of  a 
distinguishing  color,  as  green  for  the  original,  blue  for  the 
second  copy,  pink  for  the  third,  and  buff  or  yellow  for  the 
fourth.  The  back  of  this  yellow  card  contains  data  taken 
from  the  tracing  tag  (Form  43). 

With  a  production  schedule  in  front  of  him,  a  schedule 
clerk  can  make  out  a  production  order  for  each  of  the  pieces 
and  parts  required  to  be  made,  the  quantity  specified  on  a 
production  order  being  ordinarily  about  a  twenty-five  or 
thirty  days'  run.  This  is  because  it  is  desirable  to  have 
production  orders  cover  such  quantities  as  can  be  costed 
out  within  a  month,  if  possible;  that  is,  a  complete  produc- 
tion order  should  be  finished  and  turned  into  stores  within 
a  month  from  the  time  of  issuance.  Of  course,  if  a  steady 
run  is  being  made  on  these  parts,  it  would  simply  mean 
operating  from  one  production  order  on  to  another,  and 
each  of  these  orders  would  be  finished  and  costed  out  about 
every  thirty  days,  so  as  to  leave  the  amount  shown  in  "Work 
in  Progress"  or  "Unfinished  Production  Orders"  at  the 
end  of  the  month,  as  small  as  possible. 

Production  orders  should  be  numbered  consecutively, 
and,  if  they  are  issued  in  supplement  to  some  previous  pro- 
duction order,  the  number  of  this  previous  order  should  be 
shown  after  the  "Supplement  Number";  also  the  date  of 
issuance  and  the  account  which  is  to  be  charged  (whether 
component  or  finished  stores)  should  be  given,  and,  if  the 


I70       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

production  order  is  issued  for  the  filling  of  some  particular 
sales  order,  this  sales  order  number  should  be  shown.  Then 
the  quantity  called  for.  the  piece  or  part  number,  the 
specifications,  and  special  features  or  instructions  will  be 
entered. 

The  original  copy  of  each  production  order  should  be 
kept  in  the  production  department  and  filed  consecutively 
by  order  number.    When  the  order  is  completed,  if  desired 
the  cost  for  labor,  material,  overhead,  total  cost,  and  unit 
cost  can  be  entered,  and  the  order  filed  in  the  superin- 
tendent s  or  production  engineer's  office.    When  issued,  the 
third  or  pink  copy  should  be  sent  at  once  to  the  stores  clerk 
in  charge  of  the  particular  stores  room   from  which  the 
material  for  this  order  will  be  drawn.     This  will  be  his 
authority  for  issuing  the  material  called  for  by  the  order 
and  he  should  file  the  same  by  the  order  number 

M    t'  r""^/]  ^  P'^^"^^^^"  ^^^^^  is  completed,  the  stores 
clerk  should   forward  this  copy,  together  with  his  sheet 
showing  material  distribution  on  this  order  (Form  16),  to 
the  distribution  department  for  a  proper  distribution  of 
costs      The  second  or  blue  copy  should  be  filed  by  order 
number  in  the  distribution  department,  and  when  work  on 
the  order  is  completed,  it  should  be  turned  over  to  the 
production  department  with  the  total  labor  by  operations 
shown.    The  fourth  or  yellow  copy  is  kept  in  the  production 
department  and  filed  by  piece  and  part  number  and  thus 
becomes  a  working  copy  for  the  use  of  this  department. 

Tracing  Tag 

^  A  tracing  tag  form  has  been  provided  (Form  43)  which 
IS  to  be  attached  to  each  lot  of  material  at  the  time  it  is 
issued  from  stores  and  before  the  first  operation.  After 
once  being  attached  to  any  particular  lot  of  material,  the 
tag  must  remain  with  it  until  the  work  on  the  lot  it  covers 


LABOR,  MATERIAL,  AND  EXPENSE 


171 


is  completed  and  is  delivered  either  to  component  or  to 
finished  stores. 

The  purpose  and  method  of  handling  the  tracing  tag 
are  as  follows:  When  the  production  department  is  ready 
to  issue  a  production  order,  it  prepares  from  piece  key  cards 
(Form  20)  one  tracing  tag  for  each  lot  of  each  piece 
covered  by  the  production  order,  and,  as  provided  for  on 
this  tag,  there  should  be  shown  the  piece  number,  quantity 
to  be  started,  production  order  number,  lot  number,  date 
to  be  started,  and  date  to  be  finished,  together  with  such 
other  information  relative  to  the  departments  in  which  the 
various  operations  are  to  be  performed  on  the  work  as  may 
be  required. 

As  soon  as  these  tags  are  made  out  they  should  be  posted 
to  the  reverse  side  of  the  fourth  or  yellow  copy  of  the 
production  order,  where  provision  has  been  made  under 
"Started"  to  show  the  lot  number,  date,  quantity,  etc, 
together  with  the  cumulative  quantity  as  the  work  pro- 
gresses. After  these  tags  have  been  duly  posted,  they  are 
ready  to  be  turned  over  to  the  planning  and  routing  clerks 
for  the  issuing  of  production  tickets  (Form  44-46)  as 
called  for  by  the  operations  on  these  tags.  As  soon  as  the 
routing  clerk  receives  tags  of  this  character,  he  will  post  on 
to  them  from  his  piece  key  cards,  the  operations  required 
by  number  and  name,  and  also  enter  on  the  tag  in  proper 
order  of  arrangement,  department  number,  machine  num- 
ber, etc.,  for  each  and  every  operation,  going  to  the  reverse 
side  of  the  tag  with  the  operations  if  necessary. 

As  stated  before,  the  tracing  tag  is  to  be  retained  with 
the  particular  lot  to  which  it  is  attached  through  all  opera- 
tions through  which  that  lot  goes,  and  it  must  show  the 
O  K  check  of  an  inspector  for  each  operation,  also  the 
inspector's  notation,  as  "Recovered  from  Repairs,"  "Re- 
jected for  Repairs,"  "Rejected  for  Scrap,"  together  with 


172       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

the  date  the  inspection  was  made  as  indicated  by  the 
inspector's  initial  or  punch. 

When  each  lot  is  completed  and  received  in  component 
or  finished  stores,  the  pieces  are  counted  by  the  stores- 
keeper  and  this  count  entered  on  the  tag,  together  with  the 
bin  number  in  which  they  are  placed.     The  tag  is  then 
dated,  signed,  and  turned  over  to  the  stores  record  clerk 
for  entry  on  the  stores  records,  after  which  it  is  forwarded 
to  the  production  department  where  the  routing  clerk  will 
enter  on  the  back  of  the  production  order  the  quantity 
finished  in  this  particular  lot.     Thus,  on  each  production 
order  there  will  be  a  complete  record  of  the  work  started 
and  completed,  this  record  also  serving  to  give  the  routing 
clerk  full  information  as  to  the  balance  of  lots  to  be  done 
numbers  of  these  lots,  etc.    Great  care  should  be  exercised 
m  making  out  these  production  cards  accurately,  as  they 
are  the  key  to  the  proper  handling  of  all  work  in  the  factory 
Whenever  work  is  completed,  the  tracing  tags  should  be 
filed  consecutively  by  production  order  number  and  lot  num- 
ber, for  future  reference  as  to  how  work  has  been  handled 
regarding  rejections  for  repairs,  scrap,  etc. 

Issuing  Material  Requisitions 

After  the  tracing  tags  are  made  out,  general  stores 
requisitions  for  the  material  on  the  piece  key  cards  must  also 
be  made  out  (Form  10).  The  requisitions  should  be 
numbered,  this  number  being  a  combination  of  the  produc- 
tion order  number,  the  letter  of  the  operation  for  which  the 
material  is  used,  and  the  highest  lot  number  for  which  this 
requisition  will  furnish  material.  Thus,  if  a  requisition  is 
made  out  for  material  required  for  the  first  operation  on 
production  order  No.  1000  for  five  lots,  the  requisition 
number  would  read  "lOOO-A-5."  When  later  five  more 
lots  are  started,  the  requisition  for  these  second  five  lots 


LABOR,    MATERIAL,    AND    EXPENSE 


173 


would  read  "1000-A-lO,"  as  being  enough  material  for 
the  completion  of  the  tenth  lot  of  this  production  order. 
These  requisitions  may  then  be  turned  over  to  the  plan- 
ning clerks  with  the  tags. 

Production  Tickets  and  Daily  Time  Slips 

As  a  standard  practice,  labor  is  paid  6y  any  one  of 
three  methods,  viz.,  day-work,  piece-work,  or  premium 
work.  No  matter  which  of  these  methods  is  used,  the 
issuing  of  instructions  for  doing  the  work,  would  remain 
unchanged,  as  well  as  the  counting  of  the  quantity  done, 
and  the  record  of  the  time  consumed.  However,  the  method 
employed  for  calculating  the  amount  to  be  paid  would  be 
different  in  each  case. 

The  different  methods  of  paying  labor  have  been  so 
well  covered  by  excellent  literature  and  lectures  as  to  make 
unnecessary  any  description  here.  There  is,  however,  a 
production  ticket  (Forms  44-46)  for  each  one  of  these 
methods,  each  ticket  being  properly  spaced  and  captioned 
on  the  time-keeping  side,  so  as  to  make  possible  correct 
and  rapid  computations.  These  time  tickets  are  in  them- 
selves explanatory.  On  the  instruction  side,  the  data  called 
for  are  identical  for  each  one;  therefore,  in  this  respect  a 
description  of  one  is  a  description  of  all. 

These  cards  represent  to  a  certain  extent  ideal  arrange- 
ment and  captioning.  However,  the  same  information 
could  be  presented  in  different  shape  and  it  is  often  neces- 
sary to  do  so  when  designing  time  tickets  to  be  used  on 
or  by  certain  accounting  machines  and  time  or  cost  clocks. 
It  is  recommended  that,  wherever  possible,  time  be  kept  by 
the  unit  system  of  tenths  for  which  most  efficient  appliances 
have  been  made  by  the  manufacturers  of  time-keeping  and 
accounting  machines. 

As  soon  as  the  routing  clerks  have  received  a  tracing 


174 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


LABOR,    MATERIAL,    AND    EXPENSE 


175 


I 


tag  and  have  entered  the  department  numbers  and  machine 
numbers  on  this  tag  for  each  of  the  operations  to  be  done, 
they  should  make  out,  from  operation  key  cards,  instructions 
for  the  manufacture  of  the  pieces  and  parts  called  for  on 
the  tracing  tag,  these  instructions  being  given  on  the  day- 
work  production  ticket  (Form  44),  or  the  piece-work  pro- 
duction ticket  (Form  45),  or  the  premium  work  production 
ticket  (Form  46). 

The  production  ticket  number,  as  will  be  noted  on  the 
ticket,  should  be  a  combination  of  the  production  order 
number,  the  operation  letter,  and  the  lot  number,  thus  saving 
the  necessity  of  writing  these  numbers  on  another  part  of 
the  ticket.  This  greatly  simplifies  the  work  of  keeping  costs 
of  labor.  To  illustrate  this  system  of  numbering,  ticket 
No.  1500-A-l  would  signify  that  this  ticket  was  made  out 
to  cover  work  on  production  order  1500,  operation  A,  and 
lot  1.  These  tickets  can  be  made  out  for  all  of  the  opera- 
tions of  one  lot  at  a  time,  and  would  be  numbered  1500-A-l, 
150a-B-l,  1500-C-l,  1500-D-l,  etc. 

After  tickets  have  been  made  out  for  each  of  the  opera- 
tions of  any  particular  lot,  the  same  process  can  be  gone 
through  in  making  out  tickets  for  each  operation  of  lot 
No.  2,  and  so  on  for  each  of  the  lots  called  for  by  tags. 
The  date  of  issue  should  be  shown  on  the  ticket,  as  well 
as  the  date  the  operation  is  to  be  completed  according  to 
schedule  requirements.  The  department  number  and  the 
machine  character  number  for  doing  the  work  will  also  be 
entered,  but  the  man's  number  should  be  left  blank  to  be 
filled  in  by  the  operating  department  where  the  work  is  to 
be  done.  The  quantity  wanted,  piece  number,  and  piece 
name  can  be  given  and  the  routing  shown,  that  is,  "Moved 
from  Department  No ,"  and  "Moved  to  Depart- 
ment No ,"  etc.     Below  this  will  then  be  given 

instructions  for  the  work  required,  all  of  which  is  to  be 


copied  from  the  operation  key  card  (Form  33),  or  from 
the  assembly  operation  key  card,  for  all  assemblies  of  pieces 
and  parts.  The  speed  and  feed  of  the  operation  should 
also  be  shown,  together  with  the  jigs,  dies,  or  special  tools 

required. 

The  rotation  of  the  operation  given  on  the  production 
ticket  should  be  followed  exactly  by  the  workman,  as  the 
card  constitutes  his  instructions  for  doing  the  work,  and 
these  instructions  should  be  made  out  exactly  as  shown 
on  the  operation  key  card. 

Each  production  ticket  must  be  made  in  duplicate;  a 
thin,  white  original,  with  a  cardboard  duplicate  underneath 
on  which  is  made  a  carbon  copy.  The  cardboard  copy  is 
used  as  the  workman's  instruction  card.  The  original 
white  copy  is  posted  on  the  control  board  (Form  60).  When 
work  is  given  to  a  workman,  he  will  be  given  the  duplicate 
cardboard  production  ticket  showing  his  instructions,  which 
will  be  held  by  him  until  the  operation  it  covers  is  com- 
pleted. When  the  workman  has  completed  an  operation, 
however,  this  instruction  card  will  be  returned  to  the  plan- 
ning board  and  the  workman  will  receive  a  new  one  for 
some  other  work.  When  the  instruction  card  is  turned  in, 
no  matter  whether  it  be  on  the  date  of  issue  or  some  subse- 
quent date,  it  must  be  timed  out  for  checking  purposes  and 
must  be  immediately  forwarded  to  the  accounting  depart- 
ment. 

Meanwhile,  the  white  slip  remains  posted  on  the  control 
board  (Form  60),  i.e.,  is  pasted  on  the  envelope  in  the 
pigeonhole,  and  if  the  work  called  for  on  any  particular 
ticket  runs  for  more  than  one  day,  the  cardboard  copy  will 
remain  in  the  workman's  box  or  pigeonhole,  but  a  daily 
time  slip  (Forms  47-49)  for  that  workman  must  be  made 
out  and  turned  into  the  accounting  department  each  day. 
By  working  thus,  it  is  possible  to  keep  absolute  control  of 


176 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


LABOR,    MATERIAL,    AND    EXPENSE 


177 


4  ■ 


all  inventories,  so  that  on  the  last  of  the  month  the  tickets 
of  each  and  every  workman  will  have  been  turned  in  and 
will  be  closed  out  into  Production  Orders  Finished  or  Un- 
finished, as  the  case  may  be. 

When  all  of  the  operations  on  a  piece  have  been  com- 
pleted, as  called  for  by  the  tracing  tag,  this  will  be  O  K'd 
first  by  the  stores-keeper,  who  will  have  received  the 
material  into  the  stores,  and  then  by  the  routing  clerk,  who 
will  close  it  and,  together  with  all  the  tickets  and  slips,  send 
it  to  the  planning  department  where  it  will  be  filed  for  future 
reference. 

This  method  of  procedure  means  that  the  workmen  will 
not  be  responsible  in  any  way  for  keeping  time,  as  he  simply 
has  an  instruction  card  which  he  holds  until  he  has  com- 
pleted the  work,  when  he  receives  another  instruction  card. 
Meantime,  the  planning  station  will  do  all  the  timing  on 
both  the  instruction  cards  and  daily  time  slips  and  turn 
them  in  to  the  accounting  department. 

After  an  operation  is  completed,  the  production  ticket 
and  tracing  tag  will  be  turned  over  to  the  inspector,  together 
with  the  pieces  which  have  been  made,  and  as  soon  as  these 
have  been  inspected  the  inspector  enters  on  this  production 
ticket  at  the  bottom  the  date  finished  and  the  number  re- 
jected for  repairs,  rejected  for  scrap,  and  the  number  good, 
either  signing  this  ticket  or  punching  it  with  his  individual 
punch.  At  the  same  time,  he  makes  the  same  notations  on 
the  tracing  tag,  showing  the  number  "Rejected  for  Repairs" 
at  this  operation  and  also  those  "Rejected  for  Scrap";  he 
then  enters  on  the  line  showing  the  next  operation,  the 
quantity  "Good"  which  are  to  be  forwarded  for  the  next 
operation.  He  will  then  enter  the  date  on  the  line  above 
with  his  inspector's  punch  or  initials  and  pass  it  on  to  the 
workman  of  the  next  operation. 

The  production  ticket  is  now  ready  for  the  production 


department  and  should  be  placed  in  the  outgoing  mail  boxes 
for  the  messenger's  next  trip. 

The  daily  production  time  slips  (Forms  47-49)  should 
be  sent  to  the  time-keeping  department  once  a  day;  each 
morning  all  slips  should  be  placed  in  the  out-going  mail 
box  so  that  a  messenger  can  take  them  to  the  time-keeping 
department,  where  the  total  time  for  the  day  as  shown  by 
the  workmen's  time  slips,  or  non-productive,  etc.,  time 
tickets   (Forms  50-55)   will  be  checked  against  his  total 

clock  time. 

When  a  workman  has  completed  a  job  and  returned 
his  production  ticket  to  be  stamped  "Finished,"  the  planning 
clerk  should,  at  the  same  time,  withdraw  another  production 
ticket  from  his  "Jobs  Ahead"  file  for  this  workman  to 
operate  on,  and  stamp  it  "Started"  at  the  time  the  other  is 
stamped  "Stopped,"  so  that  there  will  be  no  delay  in  waiting 
for  jobs. 

The  planning  clerk  in  each  department  should  have  a 
list  of  the  piece  and  part  numbers  and  the  operations  that 
can  be  done  on  each  of  the  machines  in  his  department. 
This  table  should  be  always  in  front  of  him  so  that  he  can 
tell  at  a  glance,  when  a  workman  comes  for  a  production 
ticket,  just  what  pieces  and  parts  can  be  done  on  any  work- 
man's machine,  and,  consequently,  know  what  production 
tickets  to  take  out  of  his  "Jobs  Ahead"  file. 

Daily  Defective  Repairs  Time  Ticket 

Defects  in  articles  manufactured  are  continually  occur- 
ring, due  either  to  poor  workmanship  or  to  poor  materials. 
In  some  instances  these  defects  will  make  necessary  the 
scrapping  of  the  items;  in  other  instances  they  can  be 
recovered  by  applying  certain  repairs.  These  repairs,  how- 
ever, must  be  handled  entirely  separate  from  the  regular 
productive  work;  otherwise  any  increase  in  the  cost  of 


f: 


I 

II 


lyg       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

manufacture  due  to  such  defective  material  or  workman- 
ship cannot  be  readily  traced. 

In  order  to  handle  this  work,  a  special  daily  defective 
repairs  time  ticket  (Form  50)  has  been  designed.  Each 
foreman  should  be  provided  with  a  pad  of  these  tickets  and 
should  use  them  for  this  work,  and  for  nothing  else,  as 
indicated  by  the  captions  thereon.  The  department  and 
the  man's  number  should  be  entered,  time  started  and 
stopped  stamped  as  on  regular  tickets  with  the  time  clock, 
provision  being  made  for  two  starts  and  stops  on  the  same 
job.  The  amount  column  is  left  blank  to  be  filled  in  by  the 
timekeeper  later. 

Great  pains  must  be  taken  by  the  foreman  to  get  the 
number  of  pieces  repaired  registered  on  this  ticket,  together 
with  the  piece  number  and  the  production  order  number 
from  which  the  pieces  originally  came.  Wherever  possible, 
the  costs  for  such  repairs  should  be  charged  to  the  original 
production  order  under  which  the  pieces  were  first  started. 
Like  all  other  time  tickets,  these  must  be  turned  in  daily 
to  the  timekeeping  department  after  being  properly  O  K'd 
by  the  foreman. 

Daily  Waiting  Time  Ticket 

This  ticket  (Form  51)  is  of  much  more  importance  than 
perhaps  appears  at  first  thought.  It  is,  of  course,  necessary 
to  have  time  spent  in  the  factory  checked  against  the  *Tn" 
and  "Out"  clocks.  It  is  also  necessary  to  provide  registra- 
tion for  the  time  lost  by  workmen  waiting  for  jobs, 
materials,  tools,  or  for  any  other  reasons.  The  daily  wait- 
ing time  ticket  is  to  be  used  whenever  a  workman  has  to 
stop  work  and  wait  for  any  reason,  as  the  time  sheet  (Form 
73)  is  arranged  to  separate  for  each  pay  period  all  of  this 
waiting  time,  by  men  and  by  departments.  This  makes 
gossible  a  splendid  analysis  of  lost  time  of  this  character 


LABOR,    MATERIAL,    AND    EXPENSE 


179 


which  can  be  charged  directly  to  bad  forcmanship  or  a 
laxity  of  some  kind  on  the  part  of  the  planning  department. 
These  tickets,  after  being  O  K'd  by  the  foreman,  must  be 
turned  in  daily  to  the  time-keeping  department. 

Prorating  Orders 

Thus  far,  consideration  has  been  given  principally  to 
the  manufacture  of  articles  on  a  strictly  production  order 
basis.  There  are  often  instances,  however,  where  it  is  not 
practicable  to  handle  certain  classes  of  work  on  a  basis  of 
production  orders,  owing  first  to  the  irregularity  with  which 
the  work  is  put  through  a  factory,  and,  second,  to  the  nature 
of  the  materials  used  which  can  only  be  costed  out  on  some 

prorating  basis. 

It  becomes  necessary,  therefore,  to  make  provision  for 
the  establishment  of  certain  prorating  orders  to  which 
certain  definite  kinds  of  work  are  to  be  charged,  with  the 
understanding  that  these  prorating  orders  are  always  for 
productive  work  only.  For  these,  no  special  form  need  be 
provided,  as  they  simply  require  typewritten  instructions 
from  the  proper  authority  for  their  installation.  As  all 
have  different  numbers,  they  become  known  through  use 
from  month  to  month  and  from  year  to  year  by  their 
constant  number.  Therefore,  all  that  is  necessary  for 
collecting  the  charges  to  them  is  to  send  a  copy  of  these 
numbers  to  the  production  engineer,  time-keeping  depart- 
ment, and  any  other  department  which  might  be  affected 
by  them. 

The  manufacture  of  almost  any  product  involves  more 
or  less  work  of  this  character.  For  instance,  in  the  bicycle 
business,  enameling  is  one  element  of  this  kind,  also  nickel- 
plating.  Enameling  should  constitute  one  prorating  order 
under  a  given  number,  and  nickel-plating  should  constitute 
another  prorating  order  under  another  number;  the  total 


l8o      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

expense  for  each  one  of  these  should  be  prorated  over  the 
entire  output  made  each  month.  Painting  in  many  lines  of 
work  should  be  handled  in  the  same  way. 

Sometimes  it  is  necessary  to  create  prorating  orders  in 
connection  with  automatic  machine  departments,  as  in  such 
work  one  man  frequently  attends  several  machines,  and  to 
divide  up  the  time  of  each  man  according  to  the  particular 
machine  on  which  he  may  be  working,  is  rather  a  difficult 
and  unsatisfactory  process.  Therefore,  it  often  proves 
advantageous  to  take  all  this  work  and  charge  it  to  a  pro- 
rating order,  while  at  the  end  of  the  month  the  expense  to 
the  total  number  of  pieces  made  is  prorated  according  to 
the  capacity  of  the  various  machines  used  in  making  these 
pieces. 

This  question  of  shop  practice  is  touched  upon  at  this 
point  simply  to  illustrate  the  truth  of  the  old  saying,  that 
every  rule  has  an  exception ;  prorating  orders  are  the  excep- 
tion to  standard  production  orders. 

Daily  Prorating  Order  Time  Ticket 

For  the  recording  of  time  spent  on  prorating  orders,  a 
daily  prorating  order  time  ticket  has  been  designed  (Form 
54),  which  can  be  issued  through  the  regular  channels  of 
planning  work  or  provided  by  the  foreman  of  each  depart- 
ment according  to  the  nature  of  the  business  and  the  neces- 
sities of  each  case.  This  ticket  is  handled  like  all  other 
tickets,  by  stamping  time  "Started"  and  "Stopped"  on  it, 
and  filling  in  such  information  as  is  called  for  on  the 
form. 

Daily  Non-productive  Labor  Ticket 

There  still  remain  for  consideration  certain  phases  of 
non-productive  labor,  i.e.,  labor  spent  on  plant  betterments, 
and  labor  on  plant  repairs.     Labor  on  plant  repairs  is,  of 


LABOR,  MATERIAL,  AND  EXPENSE 


i8i 


course,  non-productive,  but  is  in  a  class  by  itself  and  is 
handled  entirely  apart  from  any  and  all  labor  that  is 
regarded  as  strictly  non-productive  labor  such  as  clerks, 

oilers,  etc. 

The  ticket  shown  in  Form  55  covers  all  non-productive 
work  and  should  include  all  labor  used  in  the  factory  not 
provided  for  by  other  tickets.  Neither  this  nor  any  other 
tickets  need  be  used  for  distinguishing  non-productive  em- 
ployees who  are  at  all  times  doing  the  same  class  of  work. 
By  this  is  meant  such  employees  as  clerks,  foremen,  stores- 
keepers,  oilers,  window  washers,  etc.,  as  the  distribution  of 
their  time  can  be  made  from  the  "In"  and  "Out"  time 
clock  record.  But  this  non-productive  labor  ticket  should 
be  used  by  all  employees  whose  time  may  be  divided  between 
regular  non-productive,  productive,  and  betterment  and  re- 
pair work,  such  as  millwrights,  electricians,  and  ordinary 
productive  employees  who  are  occasionally  engaged  in  non- 
productive work.  These  tickets  are  used  the  same  as  any 
other  time  tickets,  by  being  properly  stamped  "Started" 
and  "Stopped"  and  by  having  the  information  called  for 
thereon  filled  in. 

Plant  Betterments  and  Repairs 

In  any  factory  there  are  from  time  to  time  plant  better- 
ments, that  is,  betterments  made  by  the  company  itself.  As 
these  betterments  form  an  asset  to  the  company,  they  are 
just  as  much  productive  work  as  are  the  goods  made  for 
sale,  and  consequently  the  labor  and  material  used  must  be 
costed  up  in  exactly  the  same  way.  In  order,  however, 
that  there  may  be  no  mistake  in  making  distributions  to 
such  work,  a  separate  order  is  provided,  which,  inasmuch 
as  an  authorization  must  be  granted  for  making  each  better- 
ment, is  handled  a  little  differently  from  a  production  order 
in  issuing  it  to  the  factory. 


lg2       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Betterment  Orders 

These  betterment  orders  are  made  out  in  quadruplicate, 
and  should  be  numbered  consecutively,  and  dated ;  in  case  a 
betterment  order  is  issued  as  a  supplement  to  a  previous 
betterment  order,  the  previous  order  number  should  be 
given  after  the  "Supplement  Number/'  The  account  to  be 
charged,  such  as  "Machinery  and  Tools,"  "Shop  Fixtures 
and  Fittings,"  etc.,  is  to  be  given,  and  the  authorization 
number,  if  any,  together  with  the  bill  of  material  or  requisi- 
tion number.  The  date  to  be  completed  should  also  be 
shown.  There  should  be  given  a  complete  description  of 
the  work  to  be  done,  together  with  a  general  specification  of 
the  materials  required.     (See  Form  41.) 

The  original  (green)  copy  of  this  form  should  be 
delivered  to  the  department  which  is  to  do  the  work,  and, 
when  this  work  is  finished,  this  copy  should  be  sent  to  the 
chief  stores  clerk,  who  will  enter  his  material  costs  on  it 
and  send  it  to  the  accounting  department.  The  third 
(pink)  copy  is  to  be  delivered  at  once  to  the  chief  stores 
clerk,  who  will  deliver  the  material  required  for  any  better- 
ment, upon  presentation  of  proper  requisition.  The  second 
(blue)  copy  of  the  order  must  be  delivered  to  the  drafting 
department  for  any  drawings  or  other  information  which 
may  be  required  for  the  carrying  out  of  this  order.  The 
fourth  copy  (manila  card)  will  be  given  to  the  accounting 
department  as  authorization  for  labor  charges.  When  the 
work  is  completed,  costs  will  be  entered  on  this  manila  card, 
which  is  then  turned  over  to  the  production  department  for 
recording  purposes. 

When  work  in  the  shape  of  a  betterment  is  completed, 
it  does  not  pass  into  component  stores  or  sales  as  does  a 
regular  product  made  for  sale,  but  "Work  in  Progress"  is 
credited,  and  the  various  investment  asset  accounts  are 
charged.     If  the  betterment  is  for  machinery  bought  and 


LABOR,    MATERIAL,    AND    EXPENSE 


183 


installed  in  the  plant,  all  the  material,  the  machine  itself, 
fittings,  etc.,  and  the  labor  of  installing  it,  are  charged  to 
the  betterment  order,  and  the  total  cost  in  turn  is  charged  to 
the  "Machinery  and  Tools"  account.  If  a  betterment  is 
for  additions  to  a  building,  the  betterment  order  will  be 
charged  to  "Buildings"  account;  thus,  it  is  taken  out  of 
"Work  in  Progress"  and  charged  as  an  asset  and  is  shown 
in  the  balance  sheet  every  month,  as  provided  for  in  the 
controlling  accounts. 

In  order  to  get  the  monthly  extensions  for  betterment 
orders,  they  may  be  entered  under  a  separate  heading,  on 
the  same  sheet  as  is  used  for  production  orders,  namely, 
the  "Record  of  Production  and  Betterment  Orders,"  which 
is  described  in  Chapter  XII.  However,  it  is  better  to  keep  a 
separate  monthly  sheet  for  betterment  orders,  so  that  they 
will  not  be  confused  with  production  orders. 

Daily  Betterment  Time  Ticket 

This  form  has  been  provided  for  the  recording  of  all 
time  spent  on  betterment  orders.  (See  Form  52.)  Each 
foreman  whose  workmen  have  occasion  to  do  any  better- 
ment order  work  is  provided  with  these  tickets  in  pads,  and, 
as  soon  as  a  workman  starts  on  any  betterment  work,  the 
"Time  Started"  will  be  stamped  on  this  ticket,  and  the 
man's  number,  department  number,  and  betterment  order 
number  are  also  entered  thereon.  Under  "Description  of 
Work"  will  be  shown  the  nature  of  the  work  and  the  depart- 
ment for  which  the  work  is  done.  When  the  workman 
stops  on  this  work,  the  time  will  be  stamped  on  the  ticket. 
These  tickets  must  be  turned  in  daily  to  the  timekeeper  after 
being  O  K*d  by  the  foreman. 

Plant  Repairs 

Plant  repairs  are  authorized  and  carried  out  in  exactly 


« * 


184      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

the  same  way  as  plant  betterments ;  that  is,  an  authorization 
is  obtained  to  do  any  extensive  repair  work  and  the  repair 
order  is  then  issued;  but  as  all  work  of  this  nature  is  a 
general  overhead  expense,  the  material  and  labor  used  are 
charged  to  the  proper  account  as  provided  for  in  the  inven- 
tory classification  of  assets,  and  the  total  expense  for  work 
of  this  kind  is  charged  to  the  same  account  at  the  end  of  the 
month. 

A  repair  order  form  has  been  provided  for  making  out 
orders  to  the  factory  for  plant  repairs.  These  orders  are 
made  out  in  quadruplicate  and  handled  in  exactly  the  same 
way  as  are  the  betterment  orders,  described  above.  (See 
Form  42. ) 

It  is  often  the  case  that  for  several  months  few  repairs 
will  need  to  be  made,  and  then  in  some  one  month  a  large 
amount  of  repairs  may  become  necessary ;  therefore,  instead 
of  charging  up  the  actual  repairs  as  they  are  made,  reserves 
for  depreciation  have  been  provided  for  all  investment 
assets,  such  reserves  being  figured  out  on  the  basis  of  the 
estimated  hfe  of  the  investment  covered.  These  reserves 
are  charged  into  the  general  overhead  each  month,  thus 
making  for  uniformity  of  costs.  Then  each  month,  as 
repairs  are  made,  they  are  charged  against  these  deprecia- 
tion reserves.  To  illustrate,  a  machine  valued  at,  say,  $3,000 
gets  into  such  a  condition  as  to  require  a  complete  over- 
hauling at  an  expense  of,  say,  $500.  Now,  it  is  obvious 
that  it  would  not  be  fair  to  charge  all  of  this  expense  to 
one  month's  operation,  as  the  benefits  derived  from  such 
repairs  will  continue  for  a  long  period.  Therefore,  the 
necessity  for  such  repairs,  even  to  the  extent  of  completely 
replacing  this  $3,000  machine  at  a  given  time,  must  be 
anticipated.  A  monthly  amount  for  such  depreciation  is 
credited  each  month  into  a  "Reserve  for  Depreciation"  ac- 
count, and  overheads  charged.    Whenever  the  actual  repairs 


LABOR,  MATERIAL,  AND  EXPENSE 


185 


i 


arc  made,  they  will  be  charged  to  this  reserve  account,  and 
labor  and  material  credited  accordingly. 

The  above  method  of  handling  repairs,  for  which  pro- 
vision has  been  made  all  the  way  through,  cannot  be  too 
carefully  carried  out.  It  must  not  be  forgotten  that  aside 
from  the  direct  value  of  costs  of  operation,  their  compara- 
tive value  is  of  next  importance,  and,  unless  such  expenses 
are  properly  distributed,  comparison  of  cost  figures  as  be- 
tween di  liferent  periods  becomes  practically  impossible. 
Extraordinary  expenses  for  one  month  charged  to  the  pro- 
duction for  that  month  would  throw  the  costs  out  so  badly 
as  to  make  them  useless  for  comparative  purposes. 

Small  Repairs 

There  are  many  small  repairs  throughout  a  plant  that 
must  be  made  from  time  to  time  without  delay  and  without 
waiting  for  a  repair  order  to  be  made  out.  The  foremen 
of  the  plant  should  be  instructed  to  use  their  judgment  in 
such  cases,  but  under  no  circumstances  should  they  be  al- 
lowed to  make  such  repairs  without  issuing  the  proper  work- 
men's time  tickets  and  material  requisitions,  the  same  as 
for  any  other  work.  After  the  work  is  done,  a  formal 
order  can  be  made  out  and  issued,  and  the  number  of  the 
order  placed  on  these  various  tickets,  so  that  the  time-keep- 
ing and  stores  departments  may  properly  handle  them  and 
have  due  authority  for  making  the  necessary  distributions. 
This  is  something  that  must  be  very  carefully  watched,  as 
foremen  are  prone  to  do  much  small  repair  work  in  time 
that  is  charged  up  to  the  regular  product  made  for  sale, 
and  if  this  goes  on  to  any  great  extent  it  can  readily  be  seen 
how  quickly  comparative  costs  will  be  thrown  out 

Daily  Repair  Time  Ticket 

This  ticket  (Form  53)  has  been  provided  for  the  record- 


I 


1 86      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

ing  of  time  spent  on  repair  orders.  It  is  to  be  made  out 
and  handled  the  same  as  the  daily  betterment  time  ticket, 
and  must  be  turned  in  daily  to  the  timekeeper  after  being 
O  K'd  by  the  foreman. 

Importance  of  Accuracy  and  Promptness 

A  careful  study  and  the  proper  and  prompt  performance 
of  the  routine  outlined  in  the  foregoing  instructions  is,  of 
course,  absolutely  necessary  to  obtain  satisfactory  results. 
Especially  is  this  true  because  these  matters  are  related  to 
many  others  and  are  merely  part  of  a  whole.     In  order  to 
have  the  whole  organization  properly  co-ordinated  and  the 
entire  production  of  the  factory  worked  up  to  the  proper 
standard,  and  also  to  secure  the  data  necessary  for  main- 
taining this  standard,  it  will  be  necessary  for  each  depart- 
ment and  every  individual  to  carry  out  their  part  of  the 
work  promptly,  correctly,  and  to  the  last  detail.     Those  in 
charge  should  realize  that  if  they  allow  any  department  to 
become  inefficient  or  to  fall  behind,  the  proper  working  of 
the  whole  factory  is  affected,  the  final  results  in  the  con- 
trolling accounts  are  delayed  and  unsatisfactory  and  entirely 
lacking  in  those  vital  functions  which  are  the  reasons  for 
their  existence. 

Cost  of  Production 

While  all  the  foregoing  methods  have  been  planned  with 
the  primary  object  of  building  up  plant  efficiency  and 
developing  production,  they  have,  at  the  same  time,  been 
so  laid  out  as  always  to  obtain  cost  of  production  without 
the  necessity  of  separate  reports  and  "red  tape"  and  without 
the  installation  of  a  highly  specialized  cost  department.  Yet, 
even  if  the  expense  of  obtaining  these  costs  was  ten  times 
as  high  as  it  usually  is,  it  would  be  worth  the  price,  for, 
after  the  work  has  been  standardized,  efficiency  increased, 


LABOR,    MATERIAL,    AND    EXPENSE 


187 


and  costs  reduced,  it  is  only  by  a  thoroughly  dependable 
system  that  this  general  efficiency  throughout  the  factory 
can  be  maintained. 

All  labor  costs  are  collected  in  connection  with,  and  on 
the  same  sheet  as,  the  data  for  pay-roll  purposes,  as  outlined 
in  Chapter  XI,  "Employment  and  Handling  of  Labor."  The 
material  costs  are  collected  and  worked  out  in  conjunction 
with  the  stores-keeping  records,  as  outlined  in  Chapter  IV 
under  "Stores-Keeping,"  and  with  the  record  of  production 
and  betterments  described  in  Chapter  XII,  "Distributions" ; 
thus  making  the  collection  of  cost  records  as  nearly  auto- 
matic as  possible. 

Supplementary  Tag 

It  should  be  a  rule  that  lots  once  started  should  never 
be  split,  yet  emergencies  will  arise  where  an  exception  be- 
comes necessary  in  order  to  keep  assembly  going.  When 
such  is  the  case,  a  red  supplementary  tag  (Form  56)  should 
be  used  for  the  "Split-off"  lot.  This  tag  shows  the  piece 
number,  production  order  number,  etc.,  under  which  work 
is  being  done,  and  shows  the  original  lot  number  to  which 
the  quantity  covered  by  this  tag  belongs,  also  at  what 
operation  it  was  taken,  the  date,  by  whom,  by  what  depart- 
ment, and  the  reason  for  splitting.  The  balance  of  the 
operations  and  routing  must  be  transferred  to  this  tag 
from  the  original  tracing  tag  (Form  43),  thus  carrying  this 
quantity  through  to  completion  as  part  of  the  original  lot 
and  under  its  number. 

Rejected  for  Scrap  Tag 

The  "Rejected  for  Scrap"  tag  (Form  57)  is  to  be  filled 
out  and  attached  to  all  pieces  and  parts  that  are  rejected 
for  scrap ;  that  is,  all  pieces  or  parts  that  cannot  be  recovered 
by  any  subsequent  treatment  or  operation.     In  every  such 


if 


l88       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

case  it  must  be  filled  out  in  full  with  the  data  as  captioned 
thereon. 

Rejected  for  Defective  Repairs  Tag 

Whenever  rejected  work  comes  from  inspection  in  such 
shape  that  it  can  be  recovered  from  rejection  by  applying 
certain  repairs,  the  "Rejected  for  Defective  Repairs"  tag 
(Form  58)  is  to  be  used  and  the  work  is  to  be  governed 
exactly  by  the  captions  on  it,  which,  in  nearly  every  instance, 
are  self-explanatory.  Both  this  tag  and  the  tag  "Rejected 
for  Scrap"  can  be  made  to  slip  into  a  holder  on  tote  boxes, 
or  to  be  tied  on  material,  as  may  be  desired. 

Symbolical  Control  Chart 

A  precise  but  simple  method  of  giving  instructions  for 
handling  papers  and  transactions  in  connection  with  any 
particular  part  of  a  business  is  very  desirable.  There  is  no 
clearer  way  to  describe  anything  than  by  a  chart,  whether 
it  pertains  to  general  data  covering  some  particular  subject 
or  subjects;  whether  it  relates  to  an  organization  and  its 
co-ordination  or  relationships,  or  whether  it  is  in  connec- 
tion with  the  handling  of  papers,  transactions,  etc. 

Graphic  chronological  charts  which  afford  a  very  prac- 
tical method  of  presenting  data,  have  already  been  illus- 
trated in  Chapter  IX  (see  Forms  38,  39),  while  in  Chap- 
ter XII  an  organization  chart  (Form  76)  is  presented. 
There  is  still  another  type  of  chart  which  is  of  equal,  if  not 
greater,  importance  than  the  charts  mentioned  above,  which 
can  be  called  a  symbolical  chart.  This,  as  illustrated  in 
Form  59,  shows  the  manner  in  which  certain  items  travel 
from  one  point  to  another,  together  with  any  instructions 
they  convey.  This  chart  is  presented  in  connection  with  a 
control  board  or  planning  system  (Form  60)  for  handling 
work  in  which  there  is,  as  here  termed,  a  central  order  sta- 


li 


LABOR,  MATERIAL,  AND  EXPENSE 


189 


tion,  together  with  one  sub-order  station.  Any  additional 
sub-stations  to  be  operated  would,  of  course,  be  controlled 
from  the  central  order  station  in  precisely  the  same  way. 

This  chart  (Form  59)  offers  a  simple  expression  of  the 
routine  work  in  connection  with  planning  for  order  control 
and  clears  up  all  of  the  mystery  that  so  often  seems  to 
surround  this  subject.  The  chart  can  be  applied  to  the 
handling  of  all  kinds  of  papers  in  connection  with  orders, 
mail,  accounting,  engineering  work,  etc.  Any  concern  can 
devise  its  own  symbology  for  such  a  chart.  The  key  to 
this  need  be  given  to  but  few  persons,  thus  insuring  secrecy 
where  necessary. 

All  manufacturing  orders  are  for  units  of  some  kind,  and 
these  orders  are  broken  up  into  production  orders,  ( 1 )  for 
pieces,  and  operations  on  pieces,  and   (2)   for  assemblies 
of  pieces.     The  function  of  a  central  planning  or  order 
station  should  be  the  distribution  of  all  orders  by  pieces, 
by  operations  on  pieces,  and  by  the  assemblies  thereof. 
Where  the  work  is  over  a  wide  range  of  shop  location,  sub- 
order stations  should  be  established  according  to  geogra- 
phical requirements,  from  which  the  work  is  to  be  timed 
*Tn"  and  "Out"  to  the  men,  the  idea  of  the  sub-station  being 
to  get  a  quicker  distribution  of  the  work  by  having  the 
timing  and  control  close  to  the  workmen  and  machines.    In 
other  words,  there  is  one  general  planning  or  order  station 
for  the  whole  establishment,  but  in  addition  thereto  there 
are  sub-order  stations  for  the  purpose  of  timing  the  work 
"In"  and  "Out"  and  controlling  its  progress.     These  sub- 
order stations  will  only  control  processing  operations  and 
the  inspection  thereof;  while  the  central  order  station  will 
control  directly,  or  through  another  sub-order  station,  all 
assembling,  assembly,  inspection,  and  tryout  work. 

The  chart  given  in  Form  59  represents  this  in  detail, 
together  with  a  symbology  which  is  almost  self-explanatory; 


I 

pf 

0i 


fl'l 


11  ! 


190       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

in  practice,  the  explanation  of  these  symbols  would  not 
appear  on  the  chart  if  secrecy  was  an  object. 

Briefly  described,  the  central  order  station,  shown  near 
the  bottom  of  the  chart,  receives  from  the  production  en- 
gineering department,  as  per  "A,"  three  blue-prints;  one 
set  of  tool  key  cards;  one  set  of  tool  set-up  key  cards;  one 
set  of  fixture  key  cards ;  one  set  of  unit  key  cards ;  one  set 
of  part  key  cards;  one  set  of  piece  key  cards;  one  set  of 
operation  key  cards,  and  two  copies  of  the  production  order. 
One  copy  of  the  production  order,  "B,"  is  sent  to  the  stock 
room  as  authority  for  the  stores  keeper  to  supply  material, 
and  is  held  there  permanently  in  the  file,  with  which  in  due 
time  are  placed  duplicate  requisitions.  One  copy  of  the 
production  order,  "C,"  is  filed  in  the  central  order  station 
and  is  held  there  as  "work  on  order"  until  completed,  when 
it,  together  with  the  signed  tracing  tag  and  blue-print  No.  2 
is  returned  to  the  engineering  department.  Blue-print  No. 
1,  usually  having  been  cut  up,  is  destroyed  and  thrown  into 
the  waste  basket,  while  the  key  cards  as  a  general  thing 
supply  data  for  the  routing  and  issuing  of  instructions  from 
the  central  order  station,  and  are  consequently  on  permanent 
file  at  this  point,  as  indicated  by  "A-1." 

At  the  routing  desk  in  the  central  order  station,  the 
order  is  broken  up  into  pieces  and  operations  on  pieces,  and 
from  there  routed  in  envelope  "E"  to  the  various  sub-sta- 
tions where  the  work  is  to  be  done,  each  envelope  containing 
one  blue-print,  "E-1";  one  instruction  card  (which  is  the 
same  as  a  production  ticket)  for  each  operation  to  be  done 
on  the  piece,  "E-2" ;  one  duplicate  instruction  card,  "E-3" ; 
a  requisition  to  the  general  stores  for  material,  "E-4"; 
a  duplicate  requisition,  "E-5,"  and  a  tracing  tag  to  be 
attached  to  the  material,  "E-6."  This  envelope  is  received 
at  the  control  board  of  the  sub-order  station  and  from  here 
the  papers  are  distributed. 


LABOR,    MATERIAL,    AND    EXPENSE 


191 


The  original  requisition  for  material,  together  with  the 
tracing  tag  is  sent  to  the  stock  room,  as  per  "F,"  while  the 
duplicate  requisition  is  sent  to  the  stock  clerk  of  the  sub- 
order station,  'T-l";  the  stores-keeper  selects  the  material 
and  attaches  the  tracing  tag  to  it,  and  forwards  this  to  the 
stock  clerk  of  the  sub-order  station,  "F-2."  As  soon  as 
this  is  checked  up  by  the  stock  clerk,  and  signed  by  him,  the 
original  requisition  together  with  the  duplicate  is  returned 
to  the  stock  room,  'T-3,"  and  from  thence  the  original 
requisition  is  sent  to  the  accounting  department,  "F-4," 
and  the  duplicate  filed  in  the  stock  room,  while  the  rough 
stock  is  sent  directly  to  the  workman  as  per  "F~5." 

In  the  meantime,  the  workman's  instruction  card  (pro- 
duction ticket),  together  with  the  blue-print,  are  sent  to  the 
workman  who  is  to  perform  the  operation,  through  the  con- 
trol board  and  time  clock  as  per  "G,"  and  if  the  work  takes 
longer  than  one  day,  a  daily  time  ticket  is  made  out  and 
sent  to  the  accounting  department  as  per  "G-1.'*    As  soon 
as  the  workman  finishes  a  certain  piece  or  quantity  of  pieces, 
the  work  is  forwarded  directly  to  the  inspector  as  per  '*F-6," 
and  a  new  ticket  and  new  instruction  card,  together  with 
a  blue-print  are  forwarded  to  the  inspector  as  per  "G-2." 
When  the  work  is  completed  here,  the  envelope  containing 
the  blue-print  and  instruction  card  is  forwarded  to  the  rout- 
ing desk  of  the  central  order  station,  as  per  "E-7,"  where 
the  blue-print  goes  to  the  waste  basket  and  blue-print  No.  2 
is  drawn  out  and  forwarded  with  an  instruction  card  as 
per  "H"  to  the  control  board,  through  the  time  clock  to 
assembly,  as  per  "H-l";  and  thence  to  inspection,  as  per 
"I,"  and  thence  to  a  try-out  as  per  "J."    After  the  work  is 
completed  in  "J,"  it  is  forwarded  as  per  ''K"  to  the  central 
stores,  checked,  signed  for  and  the  tracing  tag  sent  back,  as 
per  "I,"  to  the  central  order  station.     From  here  the  copy 
of  the  production  order,  together  with  the  second  blue- 


f 


192       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

print  and  tracing  tag,  which  came  back  from  stores,  are 
put  in  an  envelope,  "E-8,"  and  returned  to  the  engineering 
department,  showing  that  the  job  has  been  completed  for 
each  individual  piece  or  for  an  assembly  of  pieces. 

In  the  routing  of  material,  as  can  be  seen  by  the  broken 
line,  it  goes  directly  from  the  workman  to  the  inspector, 
then  to  the  assembly,  then  to  the  inspector,  and  then  to  the 
try-out,  without  physically  being  taken  to  the  sub-order 
station  or  central  order  station,  as  this  is  in  accordance  with 
the  routing  of  the  tracing  tag. 

In  connection  with  the  central  order  station,  at  point 
"N"  a  line  is  shown  whereby,  if  work  on  any  particular 
job  lasts  for  more  than  one  day  the  daily  time  tickets  are 
sent  directly  to  the  accounting  department  in  the  same  way 
as  they  were  at  "G-1"  in  the  sub-order  station. 

When  the  envelope  "E"  is  sent  to  a  sub-order  station, 
it  contains  the  instruction  cards,  one  for  each  operation  to 
be  done  on  the  piece  called  for;  therefore,  if  there  were 
ten  operations  it  might  go  to  ten  different  men  before  it 
was  completed,  being  registered  in  and  out  at  the  sub-order 
station  for  each  transfer;  these  registrations  being  made 
from  the  instruction  card  which  is  returned  each  time  an 
operation  is  completed.  On  the  outside  of  the  envelope 
are  printed  a  set  of  figures  from  1  to  20,  or  more,  as  may 
be  necessary,  which  are  simply  used  to  check  up  the  opera- 
tions done.  That  is,  each  time  an  instruction  card  comes 
back  from  the  workmen,  the  operation  number  it  represents, 
or  the  letter  covering  the  operation  it  represents,  is  checked 
off  on  the  outside  of  the  envelope,  so  that  at  a  glance  the 
order  clerk  can  tell  how  far  along  any  particular  operation 
has  progressed.  As  soon  as  this  check  is  made  on  the  out- 
side of  the  envelope,  the  instruction  card  is  forwarded  to 
the  accounting  department,  as  shown  at  "N-1"  and  "G-3." 

There  are,  of  course,  any  number  of  variations  that 


LABOR.    MATERIAL,    AND    EXPENSE 


193 


H 


could  be  made  in  the  foregoing  chart;  as,  for  instance,  it 
might  be  better,  even  necessary,  in  some  plants  to  send  the 
tracing  tags  and  requisition  for  material  directly  to  the 
stock  room  instead  of  the  sub-order  station  stock  clerk;  in 
which  case  the  lines  and  the  symbols  covering  these  would 
be  drawn  accordingly.  Or,  again,  the  duplicate  requisition 
for  material  might  be  destroyed,  or  might  be  sent  to  the 
accounting  department,  according  to  other  systems  that 
may  be  in  use.  In  other  words,  the  chart  as  shown  is 
not  a  fixed  and  fast  diagram  for  doing  a  certain  thing,  but 
rather  an  illustration  of  how  systems  and  methods  and 
routine  work  can  be  expressed  in  the  shape  of  a  chart,  which 
in  itself  constitutes  the  instructions  to  the  clerks  and  others 
employed  on  the  various  operations. 

Planning  Board 

This  board  (Form  60)  is  made  up  of  vertical  units,  so 
that  it  may  be  contracted  and  expanded  from  a  minimum 
of  24  men  to  a  maximum  of  120  men  on  one  set  of  sup- 
ports. Further,  the  entire  board  is  not  only  portable,  but 
also  adjustable,  as  it  may  be  arranged  at  any  angle  desired 
from  a  vertical  position  to  a  horizontal  position.  Each  unit 
has  pigeonholes  for  12  men.  At  the  bottom  of  the  unit  are 
12  spaces  for  men's  names  and  numbers,  and,  in  connection 
with  each  space,  a  hook  on  which  to  hang  a  brass  check, 
which  represents  any  machine  the  workman  may  be  using, 
as  illustrated  by  C  and  D  in  the  small  drawing  showing  a 
portion  of  a  single  unit.  Each  pigeonhole  is  numbered,  the 
number  of  a  pigeonhole  being  given  for  each  man,  as  shown 
by  E. 

In  order  to  know  what  machines  are  or  are  not  being 
used,  a  machine  board — entirely  separate  and  distinct  from 
the  planning  board— -is  used.  This  board  is  provided  with 
hooks  on  which  are  placed  brass  checks  for  each  and  every 


194 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


machine  controlled  by  any  one  station  or  planning  board. 
These  checks  should  give  not  only  the  numbers  of  the 
machines,  but  also,  by  a  symbol  of  some  kind,  its  type  or 
character. 

Whenever  a  workman  is  given  work  and  a  machine  is 
assigned  to  him  for  doing  the  work,  the  brass  tag  repre- 
senting that  machine  is  taken  from  the  machine  board  and 
is  placed  on  the  pin  under  his  name  on  the  planning  board, 
there  to  remain  until  the  job  is  completed.  In  this  way  all 
brass  tags  hanging  on  the  machine  board  will  represent 
machines  that  are  available  for  work,  and  the  empty  spaces 
will  indicate  machines  which  are  in  use.  By  proceeding  in 
this  way,  the  machine  and  the  man  are  always  brought 
together  for  each  and  every  operation  done,  without  hav- 
ing to  post  on  the  machine  board  the  jobs  that  are  on  each 
machine,  as  is  the  case  with  most  planning  systems. 

Round  tags  can  be  used  for  machines.  If  it  is  desired 
to  post  on  the  machine  board  the  man's  number  on  his 
being  assigned  a  machine,  a  square  tag  should  be  used.  In 
this  way  information  regarding  the  distribution  of  workmen 
and  machines  will  always  be  available  by  looking  at  the 
control  board  and  at  the  machine  board,  and  without  in 
any  way  having  to  make  a  record  in  writing  of  just  how 
work  is  distributed.  Also,  as  many  men  do  not  work  on 
machines,  but  are  on  bench  work,  this  fact  is  shown  by  the 
absence  of  a  machine  tag  on  the  planning  board.  In  this 
way  is  ^.ecured  a  complete  control  of  all  men  employed. 

Whenever  an  order  is  made  up  for  a  piece  or  component, 
a  large  envelope,  made  to  fit  the  pigeonhole  in  the  control 
board,  should  be  used  in  which  to  put  blue-prints,  material 
requisitions,  tracing  tag,  and  workman's  instruction  cards 
for  all  the  operations  required  on  the  one  piece.  As  these 
are  needed  they  are  distributed  by  sequence  of  operations 
to  the  workman  in  another  envelope  of  the  same  size,  and 


LAIOR,    MATERIAL,    AND    EXPENSE 


I9S 


a  white  slip  containing  a  duplicate  of  the  instructions  given 
the  workmen  is  pasted  to  the  top  of  the  original  envelope 
so  as  to  be  visible  in  the  workman's  pigeonhole ;  the  control 
board  thus  showing  at  a  glance  the  entire  distribution  of 
work  that  has  been  given  out.  The  envelope  can  be  used 
several  times  by  pasting  one  white  slip  over  another.  Con- 
sequently, the  stock  of  the  envelope  should  be  fairly  heavy 
and  strong,  without  flap,  and  made  permanently  open  at 
the  end. 

In  case  the  work  to  be  done  is  of  such  a  nature  that 
blue-prints  or  other  bulky  papers  arc  not  used,  and  the 
pigeonholes  are  simply  wanted  for  instruction  cards,  ma- 
terial requisitions,  tracing  tags,  etc.,  for  work  ahead,  the 
pigeonholes  would  have  to  be  proportioned  accordingly,  and 
in  this  case  the  white  slip  would  simply  be  held  on  top  of 
the  pigeonhole  by  a  small  steel  clip;  any  one  of  several 
kinds  which  can  be  purchased  answering  this  purpose. 
These  clips  might  also  be  used  in  connection  with  the 
envelope,  if  for  any  reason  they  should  be  preferred. 

What  has  been  said  in  regard  to  the  order  control  chart 
also  holds  true  here,  as  there  are  many  ways  of  designing 
a  planning  board.  Form  60,  as  designed  by  the  writer,  has 
been  presented  here  because  it  seems  to  combine  to  an  un- 
usual degree  certain  points  of  adaptability,  simplicity,  and 
labor  economy  in  its  use. 


CHAPTER    XI 
EMPLOYMENT   AND    HANDLING   OF   LABOR 

In  which  the  handling  of  labor  is  considered 
from  the  time  of  starting  to  stopping,   to- 
gether with  an  approved  method  for  paying 
labor  and  distributing  its  time. 


CHAPTER    XI 

EMPLOYMENT    AND    HANDLING    OF    LABOR 


Organization  of  Employment  Department 

It  is  the  purpose  of  the  present  chapter  to  discuss  the 
subject  of  labor  somewhat  broadly,  but  at  the  same  time  to 
give  more  particular  attention  to  its  relation  to  the  account- 
ing and  statistical  work. 

Wherever  possible,  there  should  be  an  employment  de- 
partment or  bureau  which  is  to  provide  labor  for  all 
branches  and  departments  of  the  factory.  Furthermore, 
the  responsibility  of  this  department  should  be  full  and 
complete,  and  it  should  be  a  general  rule  that  no  one  may 
be  employed  in  the  factory  for  any  purpose  whatsoever 
except  through  the  employment  department. 

The  employment  manager  should  keep  on  file  all  applica- 
tions for  employment,  all  references  relative  to  employees, 
and  maintain  a  directory  of  these  employees.  In  many 
cases  he  will  also  find  it  necessary  to  compile  and  have  avail- 
able  information   in   relation  to   rooms,  board,   dwelling 

houses,  etc. 

In  order  to  handle  labor  systematically  from  its  first 
application  to  its  final  dismissal,  a  card  record  will  be  found 
convenient.  A  set  of  cards  designed  for  the  use  of  the 
employment  department  is  presented  in  Forms  61-75.  A 
detailed  discussion  of  these  cards  follows. 

Application  for  Employment  Card 

On  this  card  (Form  61),  designed  to  cover  all  general 
labor  in  the  factory,  may  be  recorded  the  various  necessary 

199 


200       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

data  in  regard  to  the  applicant.  The  cards  should  be  filed 
by  trade  or  occupation,  that  is,  under  "Machinists,"  "Black- 
smiths," "Clerks,"  etc.,  so  that,  whenever  a  requisition  for 
additional  help  is  made,  the  applications  of  those  capable  of 
doing  the  required  work  may  be  readily  located.  When 
an  employee  is  skilled  in  more  than  one  kind  of  work,  he 
should  be  indexed  under  all  the  occupations  in  which  he 
claims  to  be  competent,  and  the  file  number  will  be  marked 
on  the  card,  that  is,  the  file  number  for  reference  to  any 
letters  of  recommendation  or  correspondence  that  may  be 
received  in  connection  with  an  employee. 

Letter  Application  for  Employment 

In  order  to  provide  for  the  higher  class  of  employees, 
as  for  instance,  high-grade  office  or  engineering  help,  con- 
cerning which  a  great  deal  more  information  is  required 
than  for  ordinary  labor,  a  "Letter  Application  for  Employ- 
ment" (Form  62)  may  be  employed.  This  letter  application 
is  self-explanatory  in  its  purpose  and  use.  It  is  usually 
double- folded  to  a  4  X  6  inch  size,  and  filed  as  it  is  received, 
under  occupation  indexing  in  an  ordinary  card  index 
drawer,  the  same  as  the  application  card. 

As  in  the  case  of  the  employment  card,  the  file  number 
of  any  other  correspondence  or  material  relating  to  the 
particular  application  will  be  noted  on  the  letter  applica- 
tion. 

Reference  Inquiry  Letter 

This  is  a  form  of  letter  (Form  63)  used  in  all  ordinary 
cases  for  making  inquiry  of  those  given  as  references  by 
applicants  for  employment.  It  is  self-explanatory.  Both 
this  and  the  preceding  letter  form  are  made  to  double-fold 
to  a  4  X  6  size  so  that,  if  desirable,  they  can  be  folded  and 
filed  in  a  card  index  drawer  of  this  size. 


EMPLOYMENT   AND   HANDLING  OF  LABOR        201 


Requisition  for  Help  Card 

This  card  (Form  64)  is  for  the  use  of  all  division  heads 
and  foremen  in  making  applications  for  labor.  The  face 
of  the  card  is  filled  out  in  accordance  with  its  headings  by 
the  party  making  the  requisition.  In  each  instance  the  card 
is  made  out  in  duplicate,  the  original  being  sent  to  the 
employment  bureau,  and  the  duplicate  to  the  factory  super- 
intendent. On  the  back  of  the  original  requisition  for  help, 
in  the  columns  provided  for  the  purpose,  the  employment 
department  records  the  names  of  men  sent  for,  the  date, 
and  any  comment.  After  men  have  been  supplied,  these 
cards  may  be  temporarily  filed  in  the  employment  depart- 
ment, under  the  names  of  the  departments  from  which  they 
come,  as  they  show  the  authority  for  having  hired  the  help 
so  requisitioned. 

It  should  be  understood,  as  before  stated,  that  all  labor 
should  be  selected  and  hired  by  the  employment  department, 
and  that,  with  rare  exceptions,  all  general  labor  in  the 
factory  is  to  be  hired  and  initial  rate  adjustments  made 
without  in  any  way  being  interviewed  by  foremen  or  divi- 
sion heads.  Exceptions  to  this  rule  may  be  made  in  the 
case  of  such  labor  as  is  employed  by  letter  application  for 
employment. 

Employee's  Rate  Card 

As  soon  as  the  labor  called  for  by  a  requisition  is  ob- 
tained, the  employment  department  should  make  out  for 
each  employee  an  employee's  rate  card  (Form  65).  The 
employment  department  will  also  furnish  the  workman  with 
an  introduction  card  (Form  66)  for  presentation  to  the 
foreman  to  whom  he  is  to  report  for  work.  The  foreman 
will  take  up  this  introduction  card,  sign  and  return  it 
through  his  division  head  to  the  employment  department. 

The  employee's  rate  card  provides  for  a  running  record 


202      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


of  any  and  all  changes  affecting  an  employee  as  regards 
wages,  department,  and  clock  number.     It  is  sent  to  the 
factory  superintendent  or  other  division  head  for  approval 
of  rate  and  then  to  the  accounting  department  for  filing. 
In  every  instance  a  day  rate  must  be  set  for  each  em- 
ployee, whether  he  works  at  piece-work  or  not.    The  reason 
for  this  is  that— as  is  generally  conceded— piece-workers 
should  earn  from  20%  to  30%  more  on  piece-work  than 
they  would  on  day-work;  otherwise,  there  i<=  no  induce- 
ment for  piece-workers  to  speed  up.    Ultimately  a  running 
chart  on  piece-work  earnings,  as  compared  to  day-work 
rates,  should  develop  information  of  this  character.     If, 
however,  piece  rates  are  so  set  that  the  piece-workers  are 
running  from  30%  to  50%  more  than  their  day  rates,  piece- 
work rates  have  been  wrongly  set  and  the  quantity  of  work 
that  could  be  turned  out  has  been  misjudged.     One  un- 
fortunate result  of  such  a  mistake  is  that  piece-workers  are 
likely  to  hold  back  so  that  excessive  earnings  shall  not  call 
attention  to  the  error  in  piece  rates,  and  the  maximum  out- 
put from  equipment  is  not  obtained. 

Reductions  of  piece  rates,  when  once  these  are  estab- 
lished, are  intensely  discouraging  to  employees,  tend  to 
make  them  hold  back,  and  have  done  more  to  bring  the 
premium  system  into  disrepute  among  them  than  any  other 
thing.  Because  of  this,  piece  rates  should  never  be  reduced 
after  being  once  set,  unless  operation  changes  make  it 
necessary.  Day  rates,  however,  may  be  changed  to  take 
effect  twenty-fours  hours  after  the  employee  is  notified  of 
the  change. 

To  simplify  the  handling  of  the  pay-roll,  all  employees, 
including  piece-workers,  should  be  paid  each  pay  day  on 
a  day  rate  basis,  and  be  paid  on  the  first  of  each  month  the 
difference  between  the  day  rate  and  what  has  been  earned 
on  a  premium  or  piece-work  basis. 


a 


EMPLOYMENT  AND  HANDLING  OF  LABOR        203 

The  employee's  rate  card  is  to  be  posted  from  the  follow- 
ing cards  in  the  order  given: 

1.  "Change  in  Rate  Card'*  (Form  67),  which  is  used  by 
division  heads  to  notify  the  accounting  department  of  a 
change  in  rate,  the  reason  for  the  same,  and  the  party 
authorizing  it.  These  cards  should  be  kept  on  file  in  alpha- 
betical order  in  the  accounting  department,  so  that  they 
may  be  referred  to  at  any  time  for  authority  for  any  change 
and  the  amount  in  change  of  rate. 

2.  "Change  of  Department  Card'*  (Form  68),  which 
is  used  by  division  heads  to  notify  the  accounting  depart- 
ment of  transfers.  This  card,  however,  need  not  be  kept 
after  making  entry  on  employee's  rate  card,  as  no  purpose 
is  served  by  keeping  it  on  file. 

3.  "Report  of  Absentees'  Card"  (Form  69),  which  is 
used  by  the  timekeeping  department  for  keeping  the  foremen, 
superintendent,  and  others  advised  as  to  absentees.  This 
information  on  these  cards  or  slips  is  posted  on  the  back 
of  the  rate  cards  where  a  record  of  each  individual  em- 
ployee's absence  is  kept.  The  timekeeping  department 
should  be  held  strictly  responsible  for  prompt  notice  of 
absentees  to  all  interested  persons  both  in  the  factory  and 

in  the  oflBce. 

It  is  important  that  a  rule  should  be  made  and  strictly 
enforced,  that  if  it  is  necessary  for  an  employee  to  be  absent, 
such  employee  must  send  notice  to  the  employment  office  by 
telephone  or  otherwise,  of  his  inability  to  report  for  work, 
and  that  if  an  employee  misses  five  musters  without  sending 
such  notice,  he  will  be  dropped  from  the  pay-roll  and  not 
reinstated  except  by  re-employment  in  the  regular  way. 
There  are  two  reasons  for  this  rule:  if  such  notice  is  not 
given,  a  great  deal  of  trouble  can  be  caused  by  delayed 
work  which  the  employee  should  have  done,  and,  again,  it 
causes  trouble  in  making  up  the  pay-roll,  etc. 


;204 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Quitting  Card 

The  information  contained  on  both  sides  of  this  card 
(Form  70),  while  of  great  importance  to  the  com- 
pany as  a  whole,  is  of  particular  importance  to  the  employ- 
ment department,  as  enabling  it  to  judge  of  the  stability 
of  the  labor  employed  and  to  recommend  any  changes  neces- 
sary to  correct  evils  in  the  handling  of  labor.  It  is  there- 
fore of  the  utmost  importance  that  the  information  of  the 
quitting  card  should  be  full  and  readily  available.  Not 
only  is  the  employee's  own  reason  for  leaving  wanted,  but 
frequently,  in  addition,  the  opinion  of  some  fellow  em- 
ployee as  to  why  the  employee  left.  An  inspector's  or  fore- 
man's opinion  as  to  the  reason  for  leaving  is  also  provided 
for  on  the  back  of  the  card. 

When  a  man  is  discharged,  or  quits  for  any  reason 
whatsoever,  one  of  these  cards  should  be  made  out  imme- 
diately by  the  head  of  the  department  under  which  he  is 
employed,  and  all  the  information  entered  in  detail  as 
called  for  on  the  card.  It  is  then  to  be  sent  to  the  office 
of  the  employment  manager,  where  the  man  who  is  quitting 
will  go  for  any  adjustment  or  action  necessary  in  his  case. 
Instead  of  being  allowed  to  leave,  a  desirable  employee 
should  be  transferred  to  some  other  department  or  held  in 
some  other  way,  if  this  is  possible. 

As  one  of  the  most  important  questions  in  connection 
with  labor  is  its  stability,  an  employee  should  never  be 
allowed  to  leave  a  company  without  full  data  as  to  the 
reasons  why  he  left.  Oftentimes,  the  company  may  be  at 
fault,  through  its  division  head  or  foreman  rather  than 
the  man  w^ho  leaves;  consequently,  the  causes  that  lead  to 
an  employee's  leaving  are  always  a  question  for  serious  con- 
sideration. Unfortunately,  it  is  necessary  to  allow  fore- 
men or  division  heads  to  discharge  men  from  their  depart- 
ments; otherwise  they  could  not  maintain  discipline.    The 


EMPLOYMENT  AND  HANDLING  OF  LABOR       205 

employment  bureau  must  act  as  a  clearing  house  for  such 
discharges.  Foremen,  knowing  that  under  this  method,  in 
case  of  a  dismissal,  they  as  well  as  the  man  discharged  are 
subject  to  investigation,  are  much  more  careful  and  just 
in  their  attitude  toward  labor. 

Records  invariably  show  that  labor  is  less  stable  under 
some  foremen  than  it  is  under  others.  Records  will  also 
show  that  often  men  are  put  on  work  they  are  not  fitted 
to  do ;  whereas,  if  they  were  shifted  to  some  other  kind  of 
work,  they  would  render  satisfactory  service.  Therefore, 
all  the  information  called  for  on  the  quitting  card  should 
be  supplied,  and  before  an  employee  can  draw  his  money 
and  actually  be  let  out,  the  information  on  this  card  should 
be  analyzed  by  the  employment  manager  and  the  man 
handled  according  to  his  findings.  It  may  be  possible  to 
put  the  man  to  work  at  some  other  point.  It  is  always 
understood,  of  course,  that  before  the  man  is  paid  off, 
information  must  have  been  received  that  all  tool  checks 
and  other  charges  against  him  have  been  turned  in  and  taken 
care  of. 

Employees  Dismissed  and  Resigned 

So  much  importance  attaches  to  the  record  of  employees 
quitting,  that  it  should  be  utilized  to  make  out  the  "Monthly 
Record  of  Employees  Dismissed  and  Resigned"  (Form  71). 
These  records  give  for  each  month,  with  reasons,  the  num- 
ber of  employees  leaving.  If  employees  are  leaving  because 
they  are  dissatisfied,  it  is  certainly  a  serious  thing  for  the 
management,  and  statistics  are  needed  giving  the  causes  of 
dissatisfaction.  On  the  other  hand,  if  a  large  percentage 
of  employees  leaving  are  undesirable  employees,  there  is 
something  wrong  in  the  method  of  the  employment  depart- 
ment in  the  hiring  of  labor.  Again,  if  employees  leave  for 
other  positions,  it  is  quite  evident  that  the  other  concerns 


I 


206       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

are  offering  better  inducements.  In  other  words,  this 
record  gives  the  data  for  analyzing  all  of  the  changes  which 
take  place  in  the  personnel  of  labor. 

Pay  Period 

If  possible,  a  four-times-a-month  pay  system  should  be 
installed  instead  of  a  once-a-week  system.  The  principal 
reason  for  this  is  the  saving  of  clerical  labor  that  will  be 
effected  in  handling  a  pay-roll  at  the  end  of  the  month  in 
order  to  get  a  monthly  statement  of  profit  and  loss.  In 
other  words,  when  employees  are  paid  once  a  week,  it  nearly 
always  brings  the  end  of  the  month  in  the  middle  of  a  week, 
which  necessitates  carrying  an  extra  account  in  the  ledger 
and  it  also  involves  the  figuring  up  of  one  week's  work  two 
different  times  to  get  the  distribution,  thereby  causing  a 
great  amount  of  extra  clerical  labor.  This  applies  both  to 
non-productive  labor,  which  must  be  prorated  over  pro- 
duction orders,  and  to  the  productive  labor  itself. 

Under  the  four-times-a-month  pay  system  proposed, 
the  pay  days  may  be  set  somewhat  as  follows: 

On  the     4th,  up  to  and  including  the  31st 

12th,  "     "     "  "  "      8th 

20th,  "     "     "  "  "     16th 

28th,  "     *'     "  "  "    24th 

This  arrangement  allows  four  days  after  the  close  of  each 
pay  period  for  making  up  and  checking  the  pay-roll, 
which  is  usually  a  sufficient  time  to  do  the  work  properly 
and  accurately. 

All  employees  in  a  factory,  except  foremen  and  depart- 
ment heads,  should  be  put  on  an  hourly  basis,  and  paid  for 
the  actual  number  of  hours  they  work.  All  office  employees, 
foremen,  and  department  heads  should  be  paid  on  a  monthly 
basis,  and  paid  in  four  equal  payments  each  month.    This 


it 
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EMPLOYMENT  AND  HANDLING  OF  LABOR 


QQJ 


very  much  simplifies  the  making  up  of  a  pay-roll  and  all 
subsequent  distributions. 

Time  Card 

The  time  or  clock  card  (Form  72)  should  be  used  for 
keeping  the  daily  time  of  all  employees.  They  are  required 
to  ring  "In"  in  the  morning  and  "Out"  at  noon;  "In"  at 
noon  and  "Out"  at  night ;  "In"  for  extra  time  and  "Out" 
for  extra  time.  The  record  of  all  this  is  provided  for  on 
the  card,  each  card  showing  also  the  pay  period  and  the 
time  it  covers. 

Each  card  should  bear  the  name  of  the  employee,  and 
all  payments  made  by  the  company  should  be  controlled  by 
the  time  registered  thereon,  except  in  the  case  of  piece- 
work or  premium  work. 

A  timekeeper  should  always  be  at  the  clocks  when 
employees  are  ringing  "In"  and  "Out,"  and  it  should  be 
the  timekeeper's  duty  to  see  that  the  clocks,  card  racks,  etc., 
are  kept  in  order,  and  that  the  clocks  are  kept  on  time. 
As  soon  as  all  employees  are  in  in  the  morning,  the  head 
timekeeper  should  have  all  time  on  clock  cards  sent  to  his 
office  and  there  enter  them  on  a  time  sheet  (Form  73)  for 
the  time  registered  by  the  clock  on  the  previous  day. 

At  the  end  of  each  pay  period  these  time  cards  are 
used  for  making  up  the  pay-roll.  The  total  amount  of 
regular,  overtime,  piece-work,  and  premium  work,  shown 
on  the  time  sheets,  is  entered  in  the  spaces  provided  for  the 
same,  and  the  cards  are  then  handed  to  the  paymaster  or 
treasurer,  who  will  have  the  pay-roll  made  up,  deducting 
any  advances  and  entering  these  advances  on  the  card,  so 
as  to  show  the  kind  of  pay  which  the  employees  receive,  as 
well  as  the  total.  Each  time  card  should  bear  the  number 
of  the  time  sheet  from  which  the  amount  paid  is  taken. 
(See  also  Form  73.) 


2o8      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Pay  Check 

It  will  be  noticed  that  a  detachable  pay  check  (Form  72) 
is  provided  with  the  time  card.  When  new  cards  are  put 
in  the  racks  at  the  beginning  of  a  pay  period,  the  date  the 
pay  period  ends  and  the  employee's  number  are  inserted 
upon  each  pay  check,  the  same  as  on  the  main  part  of  the 
time  card  itself.  When  an  employee  takes  the  card  out  of 
the  rack  for  the  first  time,  he  tears  off  his  pay  check  and 
puts  it  in  his  pocket,  thus  having  a  means  of  identifying 
himself  at  any  time  he  is  called  upon  to  do  so ;  and  it  should 
be  a  rule  that  any  man  in  a  shop  who  cannot  produce  his 
pay  check  should  be  immediately  challenged  as  to  whether 
or  not  he  is  an  employee  of  the  company. 

On  pay  day  each  employee  should  have  his  pay  check 
ready,  signed  with  his  name  and  address,  and  when  he  re- 
ceives his  pay  must  pass  it  in  as  a  receipt.  If  a  premium 
system  of  payment  is  adopted,  the  premium  earnings  may 
be  put  in  a  red  envelope,  in  which  case  the  employee  will 
sign  once  for  his  regular  envelope  and  again  for  the 
premium.  This  red  envelope  is  quite  a  feature  as  it  calls 
the  attention  of  the  other  workmen  to  the  fact  that  an 
employee  is  earning  a  premium,  and  usually  creates  an 
interest  in  premium  work  and  an  anxiety  to  have  their 
own  work  put  on  a  premium  basis. 

After  payment  has  been  made,  this  pay  check  is  pasted 
on  the  back  of  the  time  card  where  the  word  "Instructions" 
appears,  with  the  signed  side  up  and  in  front,  and  the  entire 
lot  of  time  cards  with  these  checks  pasted  to  them  is 
fastened  together  and  filed  away  for  future  reference  in 
auditing. 

If  an  employee  should  lose  one  of  these  pay  checks,  it 
will  be  almost  impossible  for  anyone  finding  it  to  draw  his 
pay  if  it  does  not  show  the  owner's  signature  and  is  not 
identified  by  his  foreman.    Pay  checks  presented  outside  of 


I 


EMPLOYMENT  AND  HANDLING  OF  LABOR       209 

pay  day  should  be  challenged  for  this  information.  Further, 
a  comparison  of  signatures  with  previous  checks  would 
immediately  indicate  a  forgery,  if  one  was  attempted.  Em- 
ployees should  not  sign  their  pay  checks  until  the  morning 
of  pay  day,  thus  making  it  impossible,  if  one  is  lost,  for  a 
chance  finder  to  get  it  cashed. 

Time  Sheet  (First  Form) 

The  purpose  of  keeping  a  time  sheet  such  as  that  shown 
in  Form  73  is  much  more  than  the  mere  collection  of  time 
for  pay-roll  purposes.  Primarily  it  does  this,  but,  while 
keeping  it  for  pay-roll  purposes,  the  information  gathered 
is  also  available  for  other  purposes  far  more  important. 
First,  it  affords  a  check  on  the  factory  against  the  "In" 
and  "Out"  time  clocks;  and  second,  a  complete  record  of 
each  employee's  time  for  each  pay  period  is  secured,  show- 
ing how  this  time  has  been  disposed  of;  third,  a  record  is 
made  that  will  act  as  a  labor  distribution  sheet,  and  from  it 
can  be  compiled  all  statistics  and  costs  relative  to  the  amount 
and  the  time  expended  on  the  different  kinds  of  labor, 
namely,  day  work,  extra  time,  piece  or  premium  work,  non- 
productive time,  and  waiting  time ;  and  finally,  it  provides  a 
completely  self -balancing  and  self-proving  record,  which 
will  immediately  show  any  errors  in  turning  in  or  in  post- 
ing time  tickets,  so  that  such  errors  can  be  checked  up  and 
rectified  before  matters  become  "cold"  and  before  it  be- 
comes impossible  to  locate  discrepancies.  As  the  figures 
computed  for  pay-roll  purposes  are  the  same  figures  used 
for  distribution  data,  the  time  sheet  proves  itself,  and  at 
the  end  of  each  month  the  total  amount  expended  for  labor 
must  balance  out  exactly  with  the  total  labor  distribu- 
tion. 

The  time  sheets  illustrated  in  Forms  IZ,  74  are  there- 
fore capable  of  being  used  for: 


1 


2IO      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

1.  Checking  workmen's  daily  time  tickets  and  slips 

(see  Chapter  X)  against  the  clock  time. 

2.  Providing  a  distribution  of  each  workman's  time 

according  to  the  department  number  in  which  he 
is  working,  and  the  activity  or  kind  of  labor  at 
which  he  is  employed  in  that  department. 

3.  Furnishing  a  complete  system  of  costing  of  labor  on 

all  production  at  the  same  time  that  the  time  for 
pay-roll  is  extended. 

Two  of  these  sheets,  which  are  printed  on  both  sides, 
are  to  be  used  for  each  employee  each  month.  One  side 
of  the  first  sheet  provides  for  keeping  the  time  from  the 
1st  to  the  8th  of  the  month,  inclusive,  and  the  reverse  side, 
from  the  17th  to  the  24th  inclusive,  while  the  other  sheet 
provides  for  keeping  the  time  from  the  9th  to  the  16th 
inclusive  on  one  side,  and  from  the  25th  to  the  31st  inclusive 
on  the  other.  This  arrangement  enables  the  timekeeper  to 
enter  the  time  from  the  time  cards  and  workmen's  daily 
time  tickets  on  the  current  time  sheet,  and  leaves  the  sheet 
for  the  previous  pay-roll  available  for  figuring  extensions 
and  computing  the  pay-roll  separately.  At  the  same  time, 
it  gives  on  each  sheet  the  total  pay  for  the  period,  and  on 
the  last  sheet  of  the  month,  monthly  grand  totals  for  each 
employee,  thus  giving  the  fullest  data  which  can  possibly 
be  required  without  going  to  the  expense  of  re-compiling 
figures  for  statistical  purposes,  etc. 

As  stated  under  the  description  of  the  clock  or  time  card 
(page  207),  each  morning  the  time  on  the  time  card  is  to 
be  entered  at  the  top  of  the  time  sheet,  and  against  this 
time  will  be  checked  workmen's  time  tickets  coming  in 
from  the  factory  each  day.  Provision  has  been  made  on 
this  time  sheet  for  entering  the  hours  and  minutes  only  from 
the  workmen's  daily  time  tickets.  This  requires  an  ex- 
tension of  the  amount  in  money  but  once  for  the  entire  pay 


EMPLOYMENT  AND   HANDLING  OF  LABOR        21I 

period,  thus  saving  a  great  deal  of  time,  computation,  and 
extension  work. 

When  the  workmen's  daily  time  tickets  (Forms  44-55) 
come  in  each  morning  for  the  previous  day's  work,  the  time- 
keeper first  sorts  them  by  the  employees'  numbers  and  posts 
to  the  time  sheet.  For  all  tickets  showing  operations  on  any 
production,  betterment,  or  repair  orders,  the  "Order  Let- 
ter," ''Order  Number,"  and  "Operation  Number"  should  be 
entered  in  the  first  three  left-hand  columns  of  the  sheet,  and 
the  space  in  which  they  are  entered  between  the  heavy  cross- 
rulings  is  left  for  the  same  order  for  the  entire  pay  period, 
i.e.,  the  information  on  the  particular  order  for  the  pay 
period  is  entered  entirely  across  the  sheet. 

To  illustrate,  if  a  workman's  first  time  for  the  period 
comes  in  showing  part  of  his  time  on  production  order  No. 
500,  operation  "A,"  then  the  order  letter  "C"  ("C"  for  pro- 
duction, "E"  for  betterment,  and  "F"  for  repairs)  will  be 
entered  on  the  first  line  of  the  sheet  in  the  first  column 
headed  "Order  Letter";  under  "Order  Number"  will  be 
entered  "500,"  and  under  "Operation  Number,"  "A."  Then 
will  be  extended  under  the  proper  date  the  number  of  hours 
and  minutes  shown  by  the  time  ticket,  which  will  be  en- 
tered on  the  line  showing  the  kind  of  work,  i.e.,  day  work, 
overtime,  piece-work,  and  premium.  If  the  same  order  is 
worked  on  again  in  the  period,  it  is  entered  on  the  same 
horizontal  lines  but  under  the  proper  date  as  the  first  time. 
If  the  remainder  of  the  first  day  is  spent  on  betterment  order 
No.  100,  in  the  next  space  between  the  heavy  horizontal 
lines  will  be  entered  E  Order  No.  100,  and  the  hours  and 
minutes  entered  in  the  column  under  the  same  day  and  on 
the  day-work  line. 

As  the  workman  goes  on  working  from  one  production 
order  to  another,  the  order  number  will  be  entered  in  the 
next  vacant  space  between  the  heavy  cross  lines,  and  all  of 


212       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

the  time  for  the  pay  period  spent  on  such  order  number 
will  be  entered  between  these  same  heavy  lines,  so  that  at 
the  end  of  the  pay  period,  by  adding  across  the  page,  the 
total  time  spent  on  each  production  order  is  obtained,  to- 
gether with  the  total  cost  of  each  operation  on  each  produc- 
tion order.  Space  has  been  provided  for  posting  the  time 
on  twenty-one  different  order  numbers  in  each  pay  period. 
Usually  there  will  be  a  less  number  than  this,  but,  in  case 
there  should  be  more,  a  separate  sheet  can  be  kept  for  the 
additional  orders  and  filed  in  a  binder  directly  behind  the 
first  sheet. 

Under  each  date  in  the  "Ticket  Number"  column  of  the 
time  sheet  should  be  entered  whatever  additional  number 
there  is  to  the  time  ticket  other  than  the  production  order 
and  operation  numbers;  that  is,  all  tickets  on  production 
orders  are  to  be  numbered  with  a  combination  of  the  pro- 
duction order  number,  operation  number,  and  lot  number. 
Therefore,  as  the  production  order  number  and  operation 
number  are  given  in  the  left-hand  column  on  this  sheet,  the 
only  remaining  figure  to  be  put  in  under  "Ticket  Number" 
will  be  the  lot  number. 

When  a  workman  turns  in  a  time  ticket  for  non-produc- 
tive labor  (Form  55),  the  ticket  number  and  the  hours  and 
minutes  shown  on  the  time  ticket  should  be  entered  on  the 
lines  provided  for  that  purpose  near  the  bottom  of  the  time 
sheet.  This  also  applies  to  waiting  time,  provision  having 
been  made  for  two  waiting  time  tickets  (Form  51)  in  any 
one  day. 

It  will  be  seen  that,  adding  down  the  entire  column 
under  each  day,  the  footing  obtained  is  the  workman's  total 
number  of  hours  and  minutes  for  that  day,  and  this  total 
must  agree  with  the  total  clock  time.  If  any  discrepancy 
occurs  in  this  respect,  the  matter  must  be  taken  up  by  the 
timekeeper  with  the  foreman  or  superintendent,  and  he 


EMPLOYMENT  AND   HANDLING  OF  LABOR        213 

must  see  that  tickets  are  turned  in  for  the  entire  time  shown 
by  the  clock. 

The  hours  and  minutes  on  piece-work  must  be  entered 
on  the  time  sheet  daily,  just  as  for  day-work.  When  the 
first  ticket  for  certain  operations  on  piece-work  comes  in, 
the  timekeeper  will  enter,  in  the  "Order  Number"  column 
directly  underneath  the  number  of  the  order,  the  piece  rate 
in  red  ink,  and  when  he  posts  the  hours  and  minutes  he 
should  also  post  directly  below  this  in  red  ink  the  number 
of  pieces  processed  at  this  operation.  In  this  manner,  at 
the  end  of  the  pay  period,  the  total  number  of  pieces  pro- 
cessed can  be  extended  in  red  ink  in  the  same  column  with 
"Total  Hours,"  and  the  piece-work  earnings  can  then  be 
entered  on  the  proper  line  in  the  column  "Amount  Day- 
Work." 

Premium  earnings  should  be  handled  in  the  same  man- 
ner as  piece-work,  entering  them  in  red  ink  directly  above 
the  premium  hours.  The  "Bonus"  column  will  be  used,  of 
course,  only  in  case  of  premium  work,  when  the  premium 
bonus  will  be  shown  thereon.  The  "Total  Pay"  will  be 
entered  in  the  last  column. 

At  the  end  of  a  pay  period  this  sheet  is  transferred  from 
the  timekeeper's  active  binder,  the  other  sheet  being  used 
meanwhile,  as  it  is  then  ready  for  figuring  extensions.  This 
should  be  done  on  a  calculating  machine.  When  the  sheets 
are  extended  and  the  footings  obtained,  the  amount  of  time 
together  with  the  money  it  represents,  as  shown  on  the 
time  sheets,  should  be  carried  to  the  laborer's  time  on  clock 
card  (Form  72)  for  that  pay  period. 

After  extensions  have  been  made  for  pay-roll  purposes, 
a  recapitulation  of  the  total  hours  and  costs  of  each  produc- 
tion, betterment,  and  repair  order,  and  of  all  non-productive 
work  and  waiting  time,  are  drawn  off,  and  at  the  end  of 
the  month  the  totals  are  turned  over  for  distribution  work. 


214 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


It  will  be  seen  that  these  time  sheets  afford  a  complete 
and  clear  record  of  each  employee  individually,  and  of  all 
employees  collectively,  as  well  as  giving  complete  cost  data 
for  all  labor  employed  on  each  order  going  through  the 
factory. 

It  should  be  noted,  that  at  the  top  of  the  sheet,  not  only 
are  the  employee's  name  and  number  given,  but  also  the 
department  number  and  the  activity,  this  activity  meaning 
the  classification  of  labor,  such  as  day-worker,  piece-worker, 
premium  worker,  clerk,  non-productive  day- worker,  etc., 
the  timekeeper  being  given  a  classification  number  for  each 
of  these  by  the  distribution  department. 

In  posting  the  daily  time  tickets,  each  should  be  checked 
with  the  department  number  as  shown  at  the  top  of  the 
employee's  time  sheet,  and,  if  the  time  ticket  shows  that  he 
is  working  in  another  department,  such  time  must  be  entered 
in  a  space  between  the  heavy  cross-rulings,  in  the  first 
column  of  which  will  be  entered  "Charged  to  Department 

"    Thus,  at  the  end  of  the  month  the  total  of 

such  time  spent  in  other  departments  can  be  charged  to  the 
proper  department,  and  not  be  shown  in  such  employee's 
regular  department,  as  would  otherwise  be  the  case. 

Distribution  of  Labor  Costs 

When  the  timekeeper  receives  notice  of  the  completion 
of  any  production,  betterment,  or  repair  order  during  the 
month,  he  will  immediately  obtain  from  his  time  sheets  the 
recapitulation  of  the  labor  cost  of  such  order  and  turn  it 
over  to  the  distribution  department ;  and  at  the  end  of  each 
month  the  totals  of  all  unreported  production  orders,  non- 
productive labor,  waiting  time,  and  every  other  classification 
of  time,  will  be  turned  over  to  the  distribution  department, 
thereby  furnishing  it  with  the  complete  distribution  of  the 
entire  pay-roll  for  the  month. 


EMPLOYMENT  AND  HANDLING  OF  LABOR       215 

In  turning  over  labor  costs  on  orders  completed  during 
the  month,  notation  should  be  made  on  the  time  sheet,  so 
that  the  costs  of  these  same  orders  will  not  be  included  in 
this  distribution  report  at  the  end  of  the  month. 

In  addition  to  this,  there  will  be  drawn  off  at  the  end 
of  each  month  the  total  of  labor  charges  to  each  department, 
and  to  the  classification  of  activity  of  such  labor  in  each 
department,  as  per  the  "Labor,  Material,  and  Expense  Dis- 
tribution Sheet"  (Form  11) ;  that  is,  the  total  labor  for 
each  department  will  be  given  according  to  the  distribution 
numbers,  as  set  forth  in  Chapter  XII,  "Distributions." 

Time  Sheet  (Second  Form) 

A  second  method  of  timekeeping  is  hereby  offered  for 
consideration,  which  is  somewhat  simpler  than  the  one 
previously  described,  as,  in  so  far  as  the  time  sheet  is  con- 
cerned, it  confines  itself  to  pay-roll  purposes  only.  The  time 
sheet  illustrated  (Form  74)  provides  for  four  pay  periods 
per  month,  as  in  the  previous  case,  and  also  provides  for  the 
registration  of  the  time  or  clock  cards  (Form  72)  and  of 
the  internal  tickets,  whether  for  day-work,  overtime,  or 
simply  piece-work.  In  this  system  the  clock  cards  are 
gathered  every  morning,  and  the  hours  and  minutes  only 
are  posted  to  the  proper  column.  Then,  if  an  internal  ticket 
is  provided  for  each  and  every  employee,  it  is  posted  to  the 
column  "Regular,"  "Overtime,"  or  "Piece-Work,"  as  the 
case  may  be,  space  being  allowed  for  three  different  piece- 
work tickets  each  day. 

Extensions  on  this  sheet  for  day-work  are  made  but 
once  a  pay  period,  and  can  be  made  for  piece-work  once 
a  pay  period  or  once  a  month,  according  to  the  policy 
established  for  handling  piece-work.  That  is,  in  some 
factories  it  is  found  desirable  to  pay  men  on  a  day  rate 
basis  for  the  entire  month  and  then  once  a  month  pay  them 


'I 


1  > 


2l6      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

any  additional  amount  they  may  have  earned  on  piece-work. 
In  other  words,  the  difference  between  the  "Total  Piece- 
Work"  column  and  the  "Total  Day  Wages"  column,  as 
shown  at  the  end  of  the  month  on  this  time  sheet,  gives  in 
such  cases  the  additional  amount  earned  by  piece-work  from 
pay  period  to  pay  period  during  the  entire  month. 

It  should  be  borne  in  mind  that  this  time  sheet  serves 
no  other  purpose  than  pay-roll  requirements  and  that  all 
distributions  by  departments  and  by  production,  betterment, 
and  repair  orders  must  be  made  entirely  independent  of  it. 

For  distribution,  when  this  sheet  is  used,  reference  is 
made  to  the  departmental  distribution  sheet  shown  in  Form 
77,  in  which  the  account  numbers  run  across  the  top  of 
the  page  and  the  department  numbers  vertically  on  the  left- 
hand  side.  A  very  simple  method  of  distribution  of  time 
tickets  and  clock  cards  can  be  made  by  sorting  all  tickets  to 
a  set  of  pigeonholes  made  to  correspond  to  each  one  of 
these  departmental  distribution  numbers;  that  is  to  say, 
each  department  number,  plus  an  account  number,  should 
constitute  a  pigeonhole.  During  the  month,  all  time  tickets 
and  requisitions  are  extended  and  placed  in  these  pigeon- 
holes according  to  the  department  from  which  they  come. 
At  the  end  of  the  month,  by  simply  using  an  adding  machine 
and  entering  the  totals  on  the  distribution  sheet,  a  depart- 
mental distribution  is  obtained.  After  this,  all  tickets  and 
requisitions,  covered  by  a  production,  betterment,  or  repair 
order  number,  are  sorted  by  these  numbers,  and  the  adding 
machine  is  again  brought  into  use  and  the  total  of  each 
order  number  is  placed  on  the  record  of  production,  better- 
ment, and  repair  order  sheets  (Form  78).  This  affords  a 
simple  but  complete  method  of  obtaining  the  pay-roll,  the 
departmental  distribution,  and  the  production,  betterment, 
and  repair  order  distribution. 

This  method  can  be  simplified  still  further,  if  necessary. 


EMPLOYMENT  AND  HANDLING  OF  LABOR       217 

by  reducing  the  time  sheet  illustrated  in  Form  74  to  a  record 
of  piece-work  earnings  only,  paying  off  on  the  basis  of  the 
clock  cards  each  week  at  the  day  rate,  and  at  the  end  of 
the  month  paying  the  difference  between  day  earnings  and 
piece-work  earnings. 

In  order  to  explain  better  this  last  method  of  handling 
the  pay-roll,  a  time  or  clock  card  based  on  a  weekly  pay 
period  and  somewhat  different  in  its  construction  from  the 
one  previously  illustrated,  is  shown  in  Form  75  and  dis- 
cussed under  the  next  heading. 

Time  Card  (Second  Form) 

Every  employee  of  the  company,  in  the  office  as  well  as 
in  the  factory,  whether  a  division  head,  foreman,  or  other- 
wise, should,  without  exception,  use  a  clock  card  (Form  75) 
for  keeping  his  daily  time.  Time  clocks  should  be  installed 
throughout  the  works,  each  one  or  more  at  the  same  point 
being  called  a  "Timekeeping  Station" ;  and,  in  assigning  a 
clock  card  to  an  employee,  the  station  number  should  be 
indicated  on  the  time  card,  as  should  also  the  number  of 
the  department  in  which  he  works. 

It  will  be  noted  that  these  clock  cards  cover  a  period  of 
seven  days,  on  the  assumption  that  all  payments  are  made 
on  a  weekly  basis,  and  the  total  time  of  each  day  is  footed 
up  at  the  bottom  of  the  card. 

With  all  work  throughout  the  factory  that  is  to  be 
covered  by  a  production,  betterment,  or  repair  order,  a 
time  or  cost  ticket  bearing  the  number  of  the  order  will  be 
used.  On  the  clock  card  will  be  noted  a  checking  line  "Ck" 
just  below  the  "Total"  line  at  the  bottom  of  the  card.  In 
this  the  time  for  any  particular  date  as  shown  on  the  cost 
cards  in  the  factory,  can  be  entered  as  a  check  on  the  total 
time.  For  instance,  if  a  man's  clock  time  shows  up  for 
eight  hours,  and  his  internal  time  on  the  cost  card  shows 


2l8      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

up  for  only  seven  and  a  half  hours,  there  is  a  difference  of 
thirty  minutes  to  be  accounted  for,  which  may  be  charged  up 
to  waiting  time  if  necessary.  If  this  is  done,  at  the  end  of 
any  pay  period  or  at  the  end  of  a  month,  if  found  desirable, 
statistics  can  be  made  as  to  this  waiting  time.  Or  again,  as 
is  done  in  some  factories,  if  internal  time  tickets  are  issued 
each  day  for  each  and  every  employee,  this  bottom  space 
on  the  clock  card  can  be  used  to  check  up  the  man's  time, 
as  between  "In"  and  "Out"  time,  and  internal  time. 

When  the  time  for  the  week  has  been  duly  entered  on 
the  clock  card,  the  activity  of  the  employee,  whether  he  is 
a  foreman,  laborer,  or  clerk,  as  shown  on  the  distribution 
sheet,  is  indicated  on  the  clock  card,  and  the  entire  distribu- 
tion of  labor  can  then  be  made  from  these  clock  cards  so 
far  as  departmental  distributions  are  concerned.  In  other 
words,  much  of  the  information  that  is  compiled  on  the  time 
sheet  in  the  method  previously  discussed,  is  here  tabulated 
on  the  clock  card,  this  card  having  vertical  columns  for 
registering  time,  instead  of  horizontal  columns. 

At  the  end  of  each  pay  period,  the  clock  cards  are  to 
be  used  in  making  up  the  pay-roll.  The  total  amount  of 
regular,  overtime,  and  piece-work  earnings  having  been 
entered  in  the  spaces  provided,  the  cards  are  sent  to  the 
accounting  department  for  the  making  up  of  the  pay-roll. 
The  cashier  will  deduct  any  advances  by  entering  them  on 
these  cards  so  as  to  show  the  net  amount  of  pay  the  employee 
is  to  receive,  as  well  as  the  total. 

Regular  time  and  extra  time  on  day-work  will  be  posted 
direct  from  the  clock  card  itself,  while  piece-work  earnings 
will  always  be  posted  from  sheets,  as  before  suggested.  By 
this  process,  it  becomes  absolutely  unnecessary  to  make  up 
any  pay-roll  sheet,  thereby  doing  away  with  a  great  amount 
of  clerical  work  and  liability  to  error. 


CHAPTER    XII 

DISTRIBUTIONS 

Illustrating  the  relations  between  organiza- 
tion and  accounting  work,  and  showing  how 
labor,  material,  and  expense  are  distributed 
to  both  departments  and  orders. 


CHAPTER    XII 

DISTRIBUTIONS 

Organization 

Ordinarily,  the  organization  of  a  business  is  understood 
to  be  the  uniting  of  a  body  of  individuals  together  by  bring- 
ing its  personnel  into  systematic  connection  and  co-opera- 
tion as  a  whole,  or,  in  other  words,  to  prepare  for  the  trans- 
action of  business  by  electing  and  appointing  officers,  com- 
mittees, and  others,  who  are  to  be  vested  with  authority 
over  the  various  departments,  so  that  each  will  properly 
correlate  and  co-operate  with  all. 

This  conception  of  organization,  while  correct,  is  incom- 
plete as  it  omits  the  prime  consideration  in  designing  an 
organization.  The  things  to  be  considered  first  in  any 
manufacturing  business  are  its  functions  and  activities, 
irrespective  of  the  individuals  to  be  connected  with  it ;  that 
is,  it  is  the  designing  of  a  machine  which,  after  completion, 

must  be  manned. 

Fundamentally,  the  division  of  a  manufacturing  business 
into  departments  is  the  basis  for  its  organization,  as  the 
different  methods  of  procedure  in  the  different  departments 
require  widely  varying  experience  on  the  part  of  depart- 
mental heads,  just  as  varying  experience  is  necessary  in  the 
processing  of  different  kinds  of  material  on  the  part  of  the 

labor  employed. 

The  primary  organization  of  a  manufacturing  business, 
therefore,  is  its  division  into  such  departments  as  are  re- 
quired by  the  different  experience  demanded  for  their  opcra- 

221 


II 


il 


il 


I  ? 


I 


222       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

tion,  and  then  the  appointment  of  a  competent  personnel  to 
operate  these  divisions. 

Organization,  like  everything  else,  goes  by  assemblies 
and  sub-assemblies;  in  other  words,  in  any  organization 
as  a  whole  there  are  many  units  of  organization.  For 
instance,  all  the  purchasing  work  is  a  unit,  as  it  takes  a 
kindred  line  of  experience  and  knowledge  in  all  of  its 
various  branches;  the  same  applies  to  accounting  work, 
selling,  etc.  Therefore,  the  first  thing  to  do  in  forecasting 
an  organization  is  to  determine  what  these  prime  divisions 
or  units  should  be — thus: 

Administrative  Work  covers  (1)  finance,  (2)  invest- 
ments, (3)  insurance,  etc. 

Selling  Work  covers  (1)  advertising,  (2)  selling,  (3) 
collections,  etc. 

General  Accounting  Work  covers  (1)  billing,  (2) 
general  bookkeeping,  (3)  balance  sheets,  profit  and 
loss  statements,  etc. 

General  Office  Work  covers  ( 1 )  correspondence  and 
typewriting,  (2)  mailing  and  filing,  (3)  general 
supervision,  etc. 

The  above  relates  more  particularly  to  the  commercial 
end  of  a  business.  In  the  manufacturing  end,  under  a 
"Factory"  or  "Works  Manager,"  there  would  be: 

Purchasing  Work,  covering  (1)  buying,  (2)  receiv- 
ing, (3)  general  stores,  etc. 
Engineering  Work,  covering  ( 1 )  designing  of  product, 

(2)  designing  of  plant  preparation,  (3)  planning 
work,  etc. 

Plant  Service  Work,  covering  (1)  power  and  power 
appliances,  (2)  millwrights  and  installation  work, 

(3)  water,  steam,  electric,  and  general  plant  service, 
etc. 


DISTRIBUTIONS 


223 


Processing  Work,  covering  (1)  tool-making,  (2) 
processing  product,  (3)  equipment  maintenance, 
etc. 

Factory  Accounting  Work,  covering  (1)  time-keep- 
ing and  pay-roll,  (2)  costs  and  statistics  relating 
thereto,  (3)  inventories,  etc. 

Shipping  Work,  covering  (1)  shipping,  (2)  ware- 
housing, (3)  transportation,  etc. 

The  foregoing,  a  rough  classification  of  the  functions 
found  in  almost  any  manufacturing  business,  is  given  here 
to  bring  out  the  basic  principle  of  organization,  i.e.,  the 
fact  that  departmental  creation  is  determined  by  the  varied 
abilities  or  experiences  of  labor  required  to  operate  and 
control  the  factory  activities. 

For  a  manufacturing  business,  the  classification  given  is 
fairly  representative,  each  prime  function  embracing  only 
such  activities  or  experiences  as  are  closely  related  and 
similar.  In  other  words,  a  clerk  in  the  office  would  not  be 
expected  to  do  tool-makers'  work,  or  vice  versa. 

Organization  Chart 

While  organization  is  no  part  of  the  present  discussion 
further  than  it  affects  the  accounting  or  system  of  distribu- 
tion, nevertheless  a  chart  (Form  76)  is  given,  illustrating 
a  fairly  representative  organization  and  grouping  functional 
activities,  with  an  arrangement  of  authorities  that  is  almost 
self-explanatory. 

In  so  far  as  the  officers  are  concerned,  their  particular 
functions  are  clearly  shown  on  this  chart,  for  the  treasurer 
should  be,  in  fact,  not  in  name  or  by  in  proxy,  in  charge  of  all 
questions  relating  to  finances  and  accounting,  and  the  secre- 
tary should  be,  if  possible,  in  charge  of  all  matters  relating 
to  the  general  office  work,  etc.,  in  addition  to  his  legal 
duties  as  secretary  of  the  corporation.     So  also,  the  best 


s 

I 


ill' 


224      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

iOrm  of  organization  seems  to  be  that  which  makes  the  vice- 
president  of  the  company  its  general  manager,  as  it  gives 
him  close  working  relationship  with  not  only  the  activities 
of  the  business,  but  the  finances,  policies,  etc.,  that  control 
these  activities. 

It  is  not,  however,  so  much  the  relationship  of  authori- 
ties that  is  of  interest  at  the  present  moment,  as  it  is  a 
distribution  of  expense  over  an  organization,  made  in  such  a 
way  that  direct  responsibility  can  be  placed  on  each  depart- 
ment head  for  the  expenditures  of  his  department.  For 
example,  either  one  of  the  commercial  expense  groups  shown 
on  the  chart  (Groups  11  and  31)  may  be  taken  and  it  will 
be  quite  possible  to  lay  out  a  distribution  sheet  reflecting 
the  cost  of  this  organization. 

Factory  Overhead  Sheet  for  Distributions 

The  handling  of  production  under  engineering  super- 
vision has,  during  the  past  few  years,  made  changes  so 
rapid  and  so  radical  in  accounting  methods  as  to  have,  in 
large  measure,  completely  transformed  them.  For  example, 
cost  accounting  has  become  so  closely  identified  with  produc- 
tion engineering  or  planning  department  work  that  in  many 
lines  of  industry  it  must  be  considered  a  part  of  such  work. 

The  keen  competition  of  today  will  not  permit  of  distri- 
butions of  labor,  material,  or  expense,  either  individually  or 
collectively,  being  made  promiscuously  or  without  reference 
to  departments.  An  excellent  illustration  of  what  modern 
business  methods  demand  will  be  found  in  the  factory  over- 
head sheet  for  distributions  (Form  77),  wherein  are  shown 
three  divisions  of  overhead  expenditures,  namely,  labor, 
material,  and  expense,  each  divided  into  a  certain  number 
of  captions.  Labor  shows  four  different  kinds  of  activities; 
and  materials,  five  different  kinds  of  commodities;  while 
under  expense  there  are  seven  different  classifications.  More 


DISTRIBUTIONS 


225 


I 


subdivisions  may  be  made  if  necessary.  All  of  these  are 
governed  by  account  numbers,  the  Dewey  decimal  system 
being  used  in  the  present  instance.  All  of  these  numbered 
captions  are  used  later  at  the  time  the  monthly  balance  sheets 
are  drawn  up. 

On  the  left-hand  of  the  sheet  is  a  complete  division  of 
the  business  into  departments,  numbered  according  to  the 
Dewey  decimal  system.  Thus,  each  department  is  desig- 
nated by  name  and  number,  a  combination  of  the  latter 
with  any  account  number  constituting  a  symbol  for  distribu- 
tion. To  illustrate,  16-1.2  would  be  the  clerical  work  in  the 
bookkeeping  department,  while  97-1.1  would  be  the  fore- 
men in  the  wheel  department,  or  97-1.3  would  be  general 
non-productive  labor  in  the  wheel  department.  Or,  again, 
81-1.2  would  be  the  general  non-productive  labor  in  the 
experimental  room,  and  so  on  for  any  and  all  other  com- 
binations of  departments  and  accounts  numbers,  the  symbol 
always  being  the  number  of  the  department  plus  the  account 
number  of  either  labor,  material,  or  expense. 

By  this  method  a  complete  analysis  of  departmental  over- 
head is  obtained  for  the  entire  plant  in  such  a  way  that 
comparisons  can  be  made  from  month  to  month.  What  is 
more  important  still,  these  can  be  made  in  such  a  way  that 
the  personnel  of  an  organization  can  be  held  directly  re- 
sponsible by  departmental  divisions  for  any  variations  due 
to  the  excessive  use  of  labor,  material,  or  expense,  in  so  far 
as  they  may  have  any  responsibility  for  it. 

One  great  purpose  of  creating  a  combination  symbol 
composed  of  department  and  account  numbers,  is  to  make 
possible  the  use  of  modern  accounting  machines,  such  as  the 
Hollerith  or  Powers  machines,  for  distribution  work. 

It  must  be  borne  in  mind  that  the  important  and  real 
purpose  in  connection  with  the  ascertaining  and  distribution 
of  overheads,  is  to  show  their  percentage  or  hourly  basis 


226       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

relation   to   the   amount    of   productive    or   direct    labor 
employed. 

By  this  method  of  distribution,  the  total  direct  labor  of  a 
plant  can  be  checked  against  the  total  overhead  and  a  com- 
mon percentage  or  an  hourly  rate  obtained.  The  latter  is 
much  to  be  preferred  when  it  can  be  worked  out,  as  it  fur- 
nishes a  fairly  close  cost  on  any  unit  manufactured  where  a 
factory  is  operating  on  what  is  known  as  the  continuous 
manufacture  basis. 

It  is  highly  desirable,  however,  in  laying  out  any  system, 
to  have  it  so  flexible  that,  if  found  necessary,  the  same  rela- 
tion between  direct  and  indirect  expense  obtained  as  a  whole 
may  be  had  for  each  department.  Provision  has  been  made 
for  this  on  Form  77.  On  this  the  total  amount  of  direct 
labor  for  each  department  will  be  shown  in  Column  4.2  and 
a  means  thereby  afforded  of  ascertaining  departmental  over- 
heads by  amounts  and  percentages  which  will  enable  them 
to  be  worked  out  ultimately  on  an  hourly  basis. 

It  would  be  quite  possible  to  give  a  more  detailed 
analysis  of  overhead,  but  it  seems  hardly  necessary.  Labor 
divided  into  foremen,  clerks,  manufacturing,  and  trucking 
or  general,  would  seem  to  be  a  sufficient  division  for  the 
control  of  labor  conditions  especially  where  it  is  segregated 
by  departments.  The  same  may  be  said  of  the  divisions 
given  for  material  which  are  sufficient  for  almost  any 
business. 

Old  methods  of  accounting  employed  a  large  list  of 
standing  orders,  some  of  which  related  to  labor,  some  to 
material,  some  to  a  combination  of  labor  and  material,  and 
most  of  which  upon  analysis  lacked  any  possibility  of  placing 
direct  responsibility  for  their  variation  from  month  to  month 
and  year  to  year.  Modern  accounting  has  entirely  elim- 
inated this  system  of  standing  orders.  In  the  first  place  the 
elements  of  manufacture  have  been  reduced  to  three  primes 


DISTRIBUTIONS 


227 


i 


— labor,  material,  and  expense;  therefore,  all  accounting 
work  is  designed  to  deal  directly  with  these  three  items  for 
whatever  purposes  it  may  be  necessary  to  apply  them.  The 
method  of  distribution  as  illustrated  above  takes  full 
cognizance  of  this  condition  in  its  separation  of  producing 
from  non-producing  factors  for  purposes  of  administrative 
control. 

In  Chapter  XIII,  "Commercial  or  Office  Accounting/* 
and  Chapters  XIV,  XV,  "Controlling  Accounts,"  it  will 
be  shown  to  what  a  great  extent  factory  accounting  has 
been  effected  by  a  recognition  of  these  three  primes.  For 
instance,  such  things  as  labor,  materials,  and  other  distribu- 
tions to  standing  orders,  were  formerly  made  by  a  voucher 
record  or  cash  book,  and  were  a  matter  of  bookkeeping. 
Today,  no  such  thing  as  distributions  of  this  character  are 
recognized  in  connection  with  general  bookkeeping,  but 
they  are  taken  care  of  altogether  by  cost  accounting,  and 
this  cost  accounting  is  always  protected  by  the  issuance  of 
some  kind  of  an  order  for  the  work  required,  to  which  must 
be  charged  the  labor,  material,  and  expense  involved  in  its 
execution. 

The  following  is  a  brief  discussion  of  the  various  head- 
ings on  the  distribution  sheet,  classified  in  accordance  with 
the  arrangement  of  the  sheet: 

Labor 

Account  1.1 — Foremen.  This  should  cover  everything 
requiring  the  attention  of  the  general  foreman,  foreman  and 
assistant  or  sub-foreman,  in  every  department. 

Account  1.2 — Clerks.  All  clerical  work  of  any  kind,  in- 
cluding stenography,  typewriting,  and  general  office  routine 
in  any  individual  department  throughout  the  factory,  should 
be  charged  to  this  account. 

Account  1.3 — Manufacturing.  Under  this  caption  should 


228       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

be  entered  any  and  all  non-productive  labor  used  throughout 
the  factory  for  any  purpose  whatsoever  in  any  department 
which  is  not  registered  under  1.2  or  1.4. 

Account  \A — Trucking.  As  the  expense  for  trucking 
in  a  large  plant  is  usually  a  considerable  item,  it  is  advisable 
to  set  this  up  as  a  separate  account  called  'Trucking,'*  even 
when  the  charges  originate  through  an  organized  trans- 
portation department. 

The  expense  is  then  distributed  over  the  various  depart- 
ments in  accordance  with  the  facts. 

Column  1 — Total.  This  is  the  total  of  all  indirect  labor 
for  each  and  every  department,  by  activities,  and  it  is  to  be 
checked  against  Column  4.2 — Direct  Labor — ^between  direct 
and  indirect  labor. 

Materials 

Account  2.1 — Shipping  Supplies.  Supplies  of  this  char- 
acter are  chargeable  to  very  few  departments,  probably  not 
more  than  three  or  four  for  most  businesses.  The  heading 
covers  nails,  screws,  lumber,  excelsior,  burlap,  paper,  crates, 
etc.,  that  are  used  exclusively  for  the  purpose  of  shipping. 

These  are  separated  from  other  non-productive  materials 
because  they  are  not  consumed  in  factory  operations,  but 
are  necessary  to  transportation  of  goods  after  the  factory 
has  got  completely  through  with  its  processing  or  assembling 
operations.  These  items,  therefore,  are  not  considered  a 
part  of  factory  operations  at  all,  simply  a  warehousing 
expense  which  might  well  come  under  sales  expense. 
Usually,  however,  they  are  treated  as  a  part  of  factory 
overhead. 

Account  2.2 — Operating  Supplies.  Charged  to  this  ac- 
count will  be  such  items  as  are  consumed  in  operating  the 
plant  itself,  and  must  necessarily  embrace  many  small  items. 
In  other  words,  it  represents  material  that  in  no  way  enters 


DISTRIBUTIONS 


229 


into  a  product  manufactured  for  sale  or  a  product  resulting 
from  betterment  orders;  something  that  is  consumed  without 
being  in  any  way  directly  chargeable  to  an  order  of  any 
kind;  such  as  waste,  cutlery  compounds,  emory  wheels, 
polishing  materials,  etc.,  as  shown  in  stores  classification  of 
same.  It  should,  therefore,  be  absorbed  into  the  product 
through  overhead. 

It  is  in  view  of  these  distributions  of  materials  that  the 
classification  under  stores-keeping  has  been  so  specifically 
itemized,  enabling  the  accounting  department  to  know  just 
what  materials  are  to  be  distributed  to  such  accounts  as 
this.  In  the  development  of  stores-keeping  no  attention  has 
been  paid  to  these  necessities  until  quite  recently. 

Account  2.3 — Miscellaneous  Equipment.  A  considerable 
explanation  is  required  in  connection  with  this  distribution 
account.  Miscellaneous  equipment  includes  such  items  as 
files,  hammers,  wrenches,  drills,  tanks,  barrels,  flasks,  trucks, 
fire  buckets,  brooms,  mops,  pails,  etc.,  and  in  addition 
thereto,  a  large  proportion  of  small  cutting  tools  of  all  kinds 
which  have  been  issued  to  the  factory,  all  of  which  are  items 
carried  in  general  stores  for  expense  consumption.  They 
are  not  classed  as  fixed  assets,  being  short-lived,  but  they 
always  have  a  residue  value  in  them  upon  the  taking  of  a 
physical  inventory. 

For  instance,  an  inventory  might  show  five  dozen  half- 
inch  twist  drills,  partially  used,  and  they  would  be  put  into 
physical  inventory  at  some  valuation  and  carried  into  inven- 
tory account  as  described  in  Chapter  XIV,  "Chart  of  Con- 
trolling Accounts.''  During  the  year,  however,  there  might 
be  ten  dozen  of  the  same  sized  drills  issued  to  the  factory 
which  would  have  been  charged  up  to  expense  or  overhead, 
and  yet  at  the  end  of  the  year  practically  five  dozen  half- 
used  drills  of  this  size  might  be  found.  Therefore,  it  is 
obvious  that  there  is  always  a  standing  investment  in  items 


230 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


of  the  character  described  above,  which  have  a  recognized 
inventory  value  for  a  going  business.  Beyond  this,  as 
everything  of  this  nature  goes  into  expense,  that  is,  the 
amounts  consumed  from  year  to  year  during  inventory 
periods,  it  must  be  understood  that  all  such  items  issued 
from  stores  to  the  factory  do  not  at  once  go  to  increase  the 
controlling  accounts,  but  any  increase  or  decrease  in  assets 
of  this  character  will  have  to  be  recovered  upon  the  taking 
of  a  physical  inventory,  and  the  figures  shown  by  this 
physical  inventory  will  stand  as  the  investment  for  the  next 
succeeding  year. 

Account  2A — Fuels  and  Lubricants.  This  account  re- 
lates to  any  and  all  kinds  of  manufacturing  fuels,  whether 
gas,  oil,  or  otherwise,  that  may  be  used  by  various  depart- 
ments and  which  cannot  be  charged  directly  to  any  produc- 
tion or  betterment  order;  also  any  and  all  lubricants  used 
for  operating  machinery  of  any  kind. 

Account  2.5 — General.  This  account  covers  any  and 
all  items  not  otherwise  chargeable  to  an  order  of  any  kind 
or  to  the  previous  four  captions,  and  naturally  would  in- 
clude all  office  stationery,  forms,  etc.,  used  throughout  the 
factory. 

Column  2 — Total.  This  column  is  the  total  of  all 
materials  used  as  classified  by  departments. 

Expense 

Account  3.1 — Monthly  Depreciation.  This  account 
covers  the  total  depreciation  shown  under  reserves  (See 
Chapter  XV,  "Chart  of  Controlling  Accounts").  It  can 
be  worked  into  a  schedule  for  each  department  if  it  is 
desirable  or  necessary  to  do  so  in  order  to  obtain  more 
accurate  departmental  overheads.  The  basis  for  such  a 
schedule  would  be  the  square  foot  floor  space  occupied,  plus 
the  investment  of  equipment  contained  thereon;  otherwise, 


DISTRIBUTIONS 


231 


the  depreciations  would  simply  be  shown  in  this  column  as 
total  and  be  taken  into  overhead  as  such. 

Account  3.2 — Monthly  Insurance.  This  account  should 
show  an  aggregate  of  all  insurance  which  is  to  be  absorbed 
into  overhead  on  a  monthly  basis,  and  it  should  cover  every 
class  of  insurance  as  carried  on  the  current  ledger  accounts. 
In  other  words,  the  total  insurance  applied  to  the  plant 
should  be  prorated  monthly,  and  the  amount  shown  in  this 
column  in  total. 

Account  3.3 — Monthly  Rent.  If  any  buildings  or  prop- 
erty are  rented  for  the  use  of  the  factory,  this  account  pro- 
vides a  means  for  distributing  the  rental  to  the  depart- 
ments occupying  such  buildings  or  property;  but  if  cost  in 
the  form  of  rental  is  charged  for  the  entire  real  estate  and 
buildings  of  the  company,  a  means  is  obtained  whereby  the 
square  foot  floor  space  occupied  by  each  department  can  be 
charged  proportionately. 

Account  3.^1 — Electric  Current.  The  same  opportunity 
is  offered  here  for  arriving  at  the  lighting  expense  of  each 
department  if  proper  meter  arrangements  are  provided  to 
do  this.  Provision  is  also  made  in  this  account  to  cover 
any  and  all  power  used  by  the  departments,  either  in- 
dividually or  collectively,  provided  proper  meter  arrange- 
ments are  introduced  for  obtaining  the  consumption  of  same. 
To  this  end  it  is  to  be  hoped  that  the  power  plant  will  be 
run  as  an  independent  unit  and  that  all  current  for  light  and 
power  will  be  metered  to  each  and  every  department ;  other- 
wise the  expense  of  the  power  house  will  have  to  stand  as  an 
undistributed  overhead  to  be  prorated  on  some  other 
basis. 

Account  3.5 — ^Taxes.  This  account  covers  the  distribu- 
tion of  a  monthly  prorated  amount  of  taxes  and  must  cm- 
brace  not  only  the  real  estate  and  personal  property  taxes 
of  the  company,  but  also  any  corporation  or  other  taxes 


i%i 


232       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

that  shoxild  properly  be  distributed  over  the  product  manu- 
factured, by  an  absorption  into  overhead. 

This  distribution  account  is  related  to  the  controlling 
account  "Taxes  Accrued,"  and  consequently  has  a  prorated 
distribution  table  in  accordance  with  the  demands  of  this 

account. 

» 

Account  3.6 — Freight  and  Express.  This  account  relates 
to  the  incoming  freight  and  express  on  all  goods  of  which 
there  would  be  very  little  departmental  distribution,  the 
principal  amounts  being  charged  up  to  general  stores,  power 
plant,  etc. 

Account  Z.7 — Overhead  Unclassified.  This  account  is 
for  the  collecting  of  such  items  as  could  not  very  well  be 
distributed  to  any  of  the  foregoing  accounts.  It  might 
embrace  contract  work  for  window-washing,  janitorship,  or 
cleaning  of  buildings.  In  other  words,  this  provides  a 
special  column  for  things  that  are  not  regularly  applied  to 
overhead  or  could  not  be  classified  in  any  other  way. 

Column  3 — Total.  This  column  is  the  total  of  all 
expense  which  goes  to  create  overhead  for  the  month  and 
is  shown  by  totals  for  each  department. 

Column  4.1 — Grand  Total.  This  includes  the  grand 
total  overhead  expense  of  each  department  together  with  the 
grand  total  of  all  overhead  for  all  departments. 

Column  4.2 — Direct  Labor.  This  column  is  provided 
for  statistical  purposes  only,  to  permit  of  ready  comparisons 
between  direct  and  indirect  labor,  and  is  not  to  be  treated 
as  an  account  in  any  way. 

Redistribution 

Bearing  in  mind  the  fact  that  there  are  two  kinds  of 
overheads — those  which  belong  to  each  individual  produc- 
tive department,  and  also  the  general  overhead  or  expense 
of  all  non-productive  departments  which  must  be  prorated 


DISTRIBUTIONS 


233 


over  productive  departments — it  becomes  necessary  to  make 
a  redistribution  of  the  latter  to  the  former. 

Column  4.3 — Prorated  Overhead.  In  this  column  will 
be  placed  a  redistribution  of  all  general  overhead,  according 
to  the  percentage  of  the  direct  labor  for  each  department 
as  shown  in  Column  4.2.  In  some  instances  it  is  con- 
sidered more  conservative  and  more  equitable  to  prorate 
over  the  productive  departments  according  to  the  overhead 
of  these  departments  than  to  just  the  productive  labor,  prin- 
cipally for  the  reason  that  there  are  less  variables  for  these 
departments  on  overhead  charges  than  there  are  for  the 
productive  labor.  Column  4.3  added  to  the  overheads  shown 
in  the  productive  departments,  Column  4.1,  will  equal  full 
overhead,  Column  4.4. 

Record  of  Production,  Betterment,  and  Repair  Orders 

This  sheet  (Form  7%)  is  in  reality  much  more  than  a 
record  sheet ;  it  is  a  ledger  sheet  which,  while  debiting  and 
crediting  labor,  material,  and  overhead,  at  the  same  time 
makes  possible  an  analysis  of  the  distribution  of  all  produc- 
tion, betterment,  and  repair  orders,  to  labor,  material,  and 
expense.  Furthermore,  it  closes  out  all  order  costs  into 
unit  costs,  and  gives  absolute  control  of  all  inventory  valua- 
tions as  regards  production,  betterment,  and  repair  orders 
(Forms  40-42). 

It  was  in  the  development  of  this  "Production  Ledger," 
or  "Record  of  Production,  Betterment,  and  Repair  Orders," 
that  the  real  unification  between  cost  and  general  accounting 
took  place,  as  it  was  absolutely  the  finding  of  the  missing 
link. 

This  is  called  a  "Record  for  Production,  Betterment, 
and  Repair  Orders"  principally  as  a  matter  of  convenience. 
It  is  recommended,  however,  that  when  a  plant  is  sufficiently 
large  a  set  of  sheets  be  provided  for  production  orders. 


J 


234      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

another  set  for  betterment  orders,  and  another  for  repair 
orders.  Under  any  circumstances,  a  separate  set  should  be 
kept  for  repair  orders  which  are  closed  out  into  Column  11, 
after  which  follow  the  account  and  number  of  the  account 
to  which  they  will  go,  as  per  the  classification  of  assets. 
What  this  classification  of  assets  is  has  been  explained  fully 
in  Chapter  IV,  under  "Stores-Keeping." 

There  are  two  things  to  be  considered  in  connection  with 
this  distribution  sheet: 

First,  that  this  classification  of  assets  permits  better- 
ments to  be  distributed  under  the  column  of  account 
and  number  of  account  on  this  recording  sheet. 

Second,  that  all  repair  orders  must  be  made  according 
to  the  same  classification  as  betterment  accounts. 

In  other  words,  the  value  of  all  assets  remains  under 
assets  at  their  original  cost.  From  this  inventory  value,  a 
certain  depreciation  is  written  off  into  liabilities  each  month 
in  order  to  stabilize  the  cost  of  production.  This  percentage 
of  depreciation  is  sufficiently  large  to  cover  not  only  natural 
depreciation,  but  also  repairs  that  may  be  applied  to  recover 
depreciation.  Therefore,  all  repair  orders  should  be  made 
out  according  to  the  inventory  classification  of  assets,  and 
not  to  the  individual  tool,  except  in  cases  of  very  large, 
expensive,  and  complicated  machinery,  such  as  printing 
presses.  In  such  cases  it  becomes  necessary  to  keep  track 
of  repairs  on  an  individual  machine  so  that  obsolescence 
may  be  decided  upon  before  the  cost  of  repairs  becomes 
greater  than  the  interest  on  investment  plus  depreciation  on 
a  new  machine. 

Each  production  order  at  the  end  of  a  month  will  occupy 
but  one  line  on  this  sheet,  columns  being  provided  to  show 
the  order  number,  sales  order  number,  quantity  ordered, 
and,  when  finished,  the  actual  quantity  made.     Further 


DISTRIBUTIONS 


235 


columns  provide  for  the  symbol  or  description  of  the  item 
covered  by  the  production  order,  and  other  columns  show 
the  "Date  Started'*  and  the  "Date  Finished."  Under 
"Material"  a  column  is  shown  for  "General  Stores"  and  for 
"Semi-Finished  Stores,"  either  column  being  used  according 
to  whether  it  is  a  processing  order  or  an  assembling  order. 
A  column  is  provided  for  all  the  labor  applied  to  any  pro- 
duction order,  and  three  columns  for  overheads,  one  to  show 
"Productive  Hours,"  one  the  "Overhead  Rate"  on  either 
an  hourly  or  percentage  basis,  and  one  the  total  "Overhead 
Amount"  applied  to  production  orders. 

Thus  is  shown  the  application  of  labor,  material,  and 
expense  to  orders,  the  total  of  which,  of  course,  is  the  total 
cost.  This  total  cost  divided  by  the  quantity  made  would 
give  the  cost  of  each.  Therefore,  for  any  and  all  purposes, 
cost  has  been  closed  up  on  this  sheet  and  it  is  only  necessary 
to  transfer  the  goods  at  this  cost  price  to  the  running  inven- 
tory or  other  record  in  which  such  goods  should  appear. 

Column  7  of  the  record  of  production,  betterment,  and 
repair  orders  shows  the  total  of  the  unfinished  production 
orders  at  the  end  of  the  month,  which  are  transferred  to 
Column  1  of  the  record  for  the  following  month.  Then  any 
additional  material,  labor,  and  expense  required  to  complete 
the  production  order  will  be  added. 

Whenever  an  order  is  closed  out  into  Column  6,  it 
creates  a  credit  to  labor,  material,  and  expense,  according 
to  the  amount  shown,  and  becomes  chargeable  either  to 
Column  8,  "Semi-Finished"  or  "Component  Stores,"  to 
Column  9,  "Finished  Stores,"  or,  if  a  betterment,  to  Column 
10,  "Betterments,"  in  which  case  the  asset  account  number 
to  which  it  is  to  be  distributed  will  be  shown  in  the  column 
headed  "Account."  What  has  been  said  of  betterments  will 
also  apply  to  Column  11,  "Repairs." 

In  the  discussion  of  "Controlling  Accounts"  (Chapters 


236      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

XIV  and  XV),  it  will  be  shown  how  the  totals  of  these 
several  columns  are  taken  directly  into  controlling  accounts 
as  debits  or  credits,  as  the  case  may  be. 

This  "Record  of  Production,  Betterment,  and  Repair 
Orders"  offers  the  same  possibilities  for  accounting  machine 
distribution  work  as  departmental  distribution  sheet  does. 
Thus,  any  requisition  bearing  an  order  number  plus  2  would 
distribute  a  credit  to  general  stores.  Any  order  number 
plus  3  would  distribute  a  credit  to  all  requisitions  on  com- 
ponent stores.  In  the  handling  of  labor,  a  labor  ticket  with 
the  order  number  plus  4  would  distribute  all  labor  to  order 
numbers  and  at  the  same  time  build  up  a  total  of  productive 
labor.  Again,  if  on  each  productive  labor  ticket  there  is 
also  put  the  amount  of  overhead  on  whatever  percentage  or 
hourly  basis  it  calls  for,  5  can  be  added  to  the  order  number 
of  that  ticket,  which  will  distribute  all  the  overhead  to 
Column  5  and  to  all  production  or  betterment  orders 
accordingly. 

When  this  distribution  has  been  filled  in  on  the  sheet, 
it  then  becomes  simply  a  question  of  using  a  comptometer 
or  adding  machine  to  obtain  credits  to  Column  6,  and 
charges  to  Columns  7,  8,  9,  10,  and  11. 

In  other  words,  as  before  stated,  the  whole  arrangement 
of  this  distribution  system  is  purposed,  so  far  as  possible, 
for  handling  by  office  machinery  instead  of  ordinary  clerical 
work,  which  not  only  insures  much  greater  economy,  but 
also  a  much  greater  accuracy,  and  at  the  same  time  gives  a 
much  wider  range  for  temporary  or  specific  statistical 
systems.  Furthermore,  it  enables  costs  to  be  compiled  on  a 
cost  card  as  shown  below. 

Production  Cost  Card 

One  of  these  cards  (Form  79)  can  be  made  out  for  each 
piece  and  part  manufactured  and  filed  in  order  of  piece  and 


DISTRIBUTIONS 


237 


part  number.  A  summary  of  the  total  costs  of  labor, 
materials,  and  overhead  on  four  production  orders  is  pro- 
vided for  on  each  card,  thus  furnishing  a  comparison  of  the 
resulting  costs  of  the  various  production  orders  as  they 
come  through.  When  a  card  has  been  filled  up  by  the  com- 
pletion of  four  production  orders,  another  card  should  be 
made  out  for  succeeding  orders  and  filed  directly  behind 
the  first  one,  numbering  the  cards  in  rotation  under  each 
piece  number;  thus,  piece  No.  1000  might  have  cards  1,  2, 
3,  and  4,  etc.,  as  they  become  filled  up;  and  so  on  for  each 
piece,  numbering  from  1  up  under  each  piece  number. 

When  a  production  order  is  completed,  the  distribution 
department  should  enter  the  summary  of  the  costs  on  this 
card.  On  the  front  of  the  card  at  the  top  will  be  given 
the  grand  total  of  the  cost  summaries,  and  below  will  be 
given  the  details.  At  the  top  of  the  card  will  be  shown 
the  production  order  number,  the  date  started  and  date 
finished,  labor  and  material  costs,  and  overhead,  making  the 
total  cost;  and  then  the  unit  cost,  or  cost  of  one,  will  be 
shown.  Following  this  will  be  the  total  cost  of  labor  by 
operation,  this  information  being  furnished  by  the  time- 
keeper to  the  distribution  department. 

On  the  line  showing  each  operation  has  been  provided 
a  small  letter  "d".  If  this  operation  was  done  by  day-work, 
this  letter  will  remain,  but  if  it  is  done  as  piece-work,  the 
"d"  will  be  made  into  a  "p"  in  black  ink;  and  if  done  as 
premium  work,  the  "d"  will  be  made  into  a  "p"  in  red  ink. 
On  the  line  of  each  operation  will  then  be  given  the  date 
the  operation  was  completed,  the  quantity  passing  the  opera- 
tion as  good,  the  quantity  rejected  for  scrap,  the  quantity 
rejected  for  repairs,  the  total  productive  hours,  and  the 
total  labor  cost  for  the  operation.  On  the  reverse  side  of 
the  card,  on  the  last  line  for  labor,  will  also  be  shown  the 
same  information  for  any  labor  expended  on  defective 


238       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

repairs.  At  the  bottom  of  the  reverse  side  will  then  be 
shown  the  quantity  of  each  kind  of  material  drawn  and  the 
total  cost  of  each  kind. 

As  these  cards  show  the  exact  cost  of  production  of 
various  pieces,  they  should  be  available  only  to  such  execu- 
tives as  it  is  desired  to  have  fully  informed  concerning  costs, 
and  to  the  particular  employees  whose  duty  it  is  to  keep 
them. 

If  the  distributing  or  accounting  machines  are  not 
employed  (smaller  concerns  are  perhaps  not  justified  in 
using  such  machines),  the  following  method  of  procedure  for 
distribution  work  in  connection  with  time  tickets,  requisi- 
tions, etc.,  is  recommended  for  consideration. 

An  organization  chart  (Form  76)  and  a  distribution 
sheet  as  per  the  factory  overhead  (Form  71^  having  been 
made  up,  it  simply  remains  to  make  a  set  of  pigeonholes  to 
correspond  to  each  combination  number,  that  is,  the  pigeon- 
holes will  be  numbered  by  departments  down  the  side  and 
by  activities  and  commodities  across  the  top ;  this  combina- 
tion, of  course,  always  forming  a  charge  account.  As  the 
time  tickets  and  requisitions  come  in  from  day  to  day,  they 
are  to  be  sorted  into  these  pigeonholes,  which  sorts  them  to 
exactly  the  classification  shown  on  the  factory  overhead 
distribution  sheet.  At  the  end  of  the  month,  the  proposi- 
tion is  one  simply  for  an  adding  machine. 

First,  the  tickets  can  be  totaled  by  departments  and  by 
account  numbers  as  per  the  overhead  sheet,  which  will 
give  a  complete  departmental  distribution  of  non-productive 
labor,  material,  and  direct  labor.  Second,  the  tickets  and 
requisitions  may  then  be  totaled  on  an  adding  machine 
according  to  order  numbers.  These  can  then  be  posted 
direct  to  the  "Record  of  Production,  Betterment,  and  Re- 
pair Orders''  (Form  78),  which  method  of  procedure  for 
both  departmental  distributions  and  for  order  number  distri- 


DISTRIBUTIONS 


239 


butions  is  simple  and  accurate,  and  does  away  with  a  great 
deal  of  clerical  work  in  posting. 

In  Chapter  XI,  "Employment  and  Handling  of  Labor,** 
a  complete  method  of  distribution  was  shown,  which  is 
preferable,  the  whole  proposition  in  such  case  practically 
being  an  adding  and  calculating  machine  operation. 

Whether  a  set  of  pigeonholes  is  used  or  whether  account- 
ing and  distributing  machines  are  used,  depends  somewhat 
on  the  nature  of  the  business,  volume  of  work,  and  the 
amount  of  detail  that  is  required. 

Sales  Analysis  Sheet 

A  tentative  "Sales  Analysis  Sheet"  is  shown  in  Form  80, 
which  illustrates  how  a  monthly  distribution  of  sales  and 
costs  can  be  arrived  at  by  simply  posting  each  day  the  total 
sales  and  the  total  cost  to  this  sheet,  using  an  adding 
machine  at  the  end  of  the  month  to  get  the  totals  of  all 
sales,  which  are  then  transferred  to  the  monthly  balance 
sheets.  The  method  of  procedure  is  to  take  the  sales 
directly  off  the  shipping  orders  each  day  together  with 
costs,  total  them  on  an  adding  machine,  and  transfer  them 
to  this  sheet;  the  method  of  handling  sales  and  shipping 
orders  nearly  always  being  peculiar  to  each  different  kind 
of  business. 

This  analysis  sheet,  which  is  referred  to  in  several 
instances  in  Chapters  XIV,  XV,  "Controlling  Accounts," 
is  presented  here  in  order  to  make  the  working  of  the 
accounts  involved  perfectly  clear. 


CHAPTER    XIII 


COMMERCIAL   OR   OFFICE   ACCOUNTING 


i 


Explaining  in  detail  the  elements  and  work- 
ings of  a  voucher  system  for  handling  cash; 
the   detail   of   controlling   accounts;    and   a 
commercial  distribution  of  expense. 


CHAPTER    XIII 

COMMERCIAL   OR   OFFICE   ACCOUNTING 

The  Function  of  Commercial  Accounting 

The  discussion  which  follows  is  not  intended  to  be  an 
explanation  of  bookkeeping  in  the  ordinary  sense  of  the 
word,  but  rather  of  commercial  accounting  which  is  the 
preparation  for  a  distribution  of  summarized  current  re- 
ceipts and  disbursements  to  certain  controlling  accounts. 

Further,  it  shows  how  and  why  these- distributions  in 
industrial  enterprises  are  made  by  cost  rather  than  by 
ordinary  bookkeeping  methods,  and  how  this  cost  account- 
ing is  then  linked  with  controlling  accounts  through  the 
medium  of  commercial  accounting. 

The  Voucher  System 

The  best,  and  in  fact  the  only  scientific  way  of  handling 
general  accounting  work,  is  by  the  voucher  system,  in  which 
vouchers  are  used  for  entering  all  invoices,  thus  eliminating 
the  old-fashioned  purchase  ledgers  and  the  distributions  con- 
tained therein.  The  voucher  system  herewith  proposed 
consists  of  a  purchase  voucher  (Form  81),  which,  in  con- 
nection with  a  "Voucher  Record"  (Form  84),  constitutes 
a  purchase  creditor's  ledger,  or  a  statement  of  the  account 
with  each  purchase  creditor.  The  voucher  record,  as  its 
name  implies,  is  a  record  of  all  these  accounts  and  at  the 
same  time  a  distribution  of  all  purchases  to  summarized  or 
prime  accounts,  as  will  be  explained  further  on. 

These  vouchers  are  entered  on  the  voucher  record,  which 

243 


244 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


is  closed  monthly  irrespective  of  whether  any  of  the  vouchers 
may  or  may  not  have  been  paid.  This  is  an  important  fact 
to  remember.  The  total  amount  of  each  column  of  the 
voucher  record  shown  is  then  carried  over  to  the  private 
ledger  or  controlling  accounts. 

There  is  one  thing  in  connection  with  the  use  of  this 
form  of  voucher  record  to  which  attention  is  called,  and 
concerning  which  reference  has  been  made  elsewhere; 
namely,  that  the  expenditures  of  any  manufacturing  busi- 
ness always  reduce  themselves  to  three  primary  elements, 
i.e.,  labor,  material,  and  expense.  This  is  one  of  the  cardinal 
principles  of  modern  accounting,  and  advantage  is  taken  of 
this  to  simplify  controlling  accounts. 

General  Stores  Under  the  Voucher  System 

In  order  that  this  may  be  thoroughly  understood,  it  is 
necessary  to  refer  to  general  stores  again,  and  to  review 
enough  of  the  previous  discussion  to  connect  them  with  the 
vouchering  of  materials.  It  will  be  recalled  that  general 
stores,  from  an  inventory  point  of  view,  embraces  every- 
thing that  is  purchased  in  the  shape  of  materials,  tools, 
equipments,  etc.  General  stores  may  be  issued  to  the  fac- 
tory only  upon  a  requisition  which  must  always  show  two 
things:  first,  the  department  which  draws  the  material  from 
stores,  and,  second,  the  order  number  to  which  the  material 
is  to  be  charged.  If  material  is  to  be  used  for  goods  which 
are  to  be  manufactured  for  sale,  it  must  be  charged  to  a 
production  order.  If  for  construction  work  or  the  installa- 
tion of  new  machinery,  it  must  be  charged  to  plant  better- 
ments. 

For  instance,  if  a  new^  machine  of  some  kind  is  purchased, 
it  will  be  received  into  general  stores,  the  same  as  anything 
else  that  is  bought,  and  on  the  voucher  record  the  amount 
will  simply  appear  as  a  charge  to  "General  Stores."    When 


It' 


I. 


COMMERCIAL    OR    OFFICE    ACCOUNTING         ^.^ 

it  is  desired  to  install  this  machine,  a  betterment  order  is 
issued  which  authorizes  a'requisition  drawing  this  machine 
out  of  general  stores.  To  this  betterment  order  will  be 
charged  any  additional  material  which  is  required,  the  labor 
costs  of  installing  the  machine,  and  also  some  proportionate 
amount  for  overhead  expense.  Upon  the  completion  of  the 
installation,  the  betterment  order  is  closed  up  and  the  total 
cost  handed  to  the  accounting  department,  there  to  be  posted 
to  whatever  classification  of  assets  it  may  belong. 

Similarly,  if  any  construction  work  on  the  buildings  or 
any  other  work  that  would  create  a  fixed  asset,  is  to  be  done 
a  betterment  order  must  be  issued.    In  this  way  the  accurate 
cost  of  all  betterments  is  secured  and  placed  in  the  proper 
asset  account. 

The  same  thing  applies  to  repairs,  and  the  repair  order 
must  always  show  two  things:  first,  the  department  of  the 
factory  for  which  the  repairs  have  been  made,  and,  second 
the  classification  of  assets  that  they  are  made  on,  so  that 
the  distribution  of  repair  orders  is  made  in  the  same  manner 
as  betterment  orders. 

From  this  explanation  it  will  readily  be  understood  why 
the  old  time  voucher  record  distribution  has  given  way 
before  modern  accounting  methods,  and  why  no  distribution 
work  IS  done  on  the  present  voucher  record  or  in  the  con- 
trolling accounts  other  than  that  given  under  primary  cap- 
tions.  Distributions  are  no  longer  a  part  of  ordinary  book- 
keepmg;  they  belong  to  the  cost  system  and  are  recapitu- 
lated into  controlling  accounts. 

Purchase  Voucher 

The  purchase  voucher  (Form  81)  is  printed  on  sheets 
5  X  8  mches  and  consists  of  an  original  and  a  duplicate. 
When  an  invoice,  properiy  passed  and  O  K'd  for  receipt, 
quantity,  price,  etc.,  is  received  by  the  accounting  depart- 


246      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

ment,  the  extensions  are  first  proved  and  then  entered  on 
the  purchase  voucher.  The  purchase  voucher  must  show 
the  name  and  the  address  of  the  purchase  creditor,  date  of 
invoice  and  amount.  The  invoice  is  entered  on  the  voucher 
as  soon  as  it  is  received,  the  number  of  the  voucher  is  placed 
on  the  invoice,  and  the  two  forms  are  fastened  together, 
and  are  then  filed  in  a  temporary  file,  in  alphabetical  order, 
until  the  voucher  is  entered  in  the  voucher  record.  At  the 
end  of  the  month,  the  voucher  is  closed  and  entered  upon 
the  voucher  record  for  distribution  thereon,  into  the  proper 
account  or  accounts. 

Where  it  is  desired  to  discount  or  pay  an  invoice  before 
the  end  of  the  month,  such  invoice  is  entered  on  the  voucher 
which  is  thereupon  closed  out  as  complete,  is  O  K'd  by 
the  necessary  authority,  and  the  total  posted  into  the  voucher 
record.  In  entering  the  amounts  of  these  vouchers  on  the 
voucher  record  in  the  accounts  payable  column,  the  gross 
amount  of  the  voucher  is  entered,  that  is,  no  discounts  are 
to  be  deducted  at  this  time,  provision  being  made  for  dis- 
count earnings  in  the  check  register  in  the  column  **Dis- 
counts  on  Purchases." 

After  vouchers  have  been  closed  out  at  the  end  of  the 
month  and  entered  in  the  voucher  record,  they  should  be 
filed  in  an  ''Unpaid  Voucher  File"  until  paid. 

In  order  to  provide  for  the  payment  of  vouchers  at  the 
proper  time,  a  monthly  "one  to  thirty-one"  card  tickler 
(Form  82)  should  be  kept,  and  the  name  of  the  purchase 
creditor  together  with  the  numbers  of  the  vouchers  which 
are  to  be  paid  on  any  particular  date  should  be  entered  on 
the  tickler  card  of  that  date.  Several  entries  can  be  made 
on  one  card.  On  the  date  of  payment,  the  vouchers  are 
given  to  the  cashier  who  passes  them  for  payment  and  has 
the  necessary  checks  drawn.  Each  check  must  show  the 
number  of  the  voucher  paid,  and  its  acceptance  in  payment 


COMMERCIAL    OR    OFFICE    ACCOUNTING 


247 


of  the  voucher  thus  indicated  will  make  it  a  complete  legal 
receipt  for  the  same.  The  duplicate  voucher  accompanies 
the  check  as  a  remittance  slip,  and  the  original  is  filed 
alphabetically  in  the  paid  voucher  file.  After  a  voucher 
has  been  paid,  all  of  the  invoices  covered  by  it  are  marked 
"Paid"  and  filed  alphabetically. 

By  making  all  payments  by  check  in  connection  with  a 
voucher  system  as  outlined  above,  a  complete  and  proper 
distribution  of  the  payments  is  obtained,  and,  as  the  voucher 
is  not  attached  to  the  check  and  does  not  pass  through  the 
bank  but  goes  direct  to  the  payee,  it  does  not  reveal,  as 
does  the  ordinary  voucher  check,  what  bills  are  being  paid, 
dates,  etc.,  for  the  information  of  everyone  through  whose 
hands  the  check  passes. 

Charge  Vouchers 

In  order  to  provide  for  adjustments  on  purchase  vouch- 
ers after  they  have  been  closed,  charge  vouchers  (Form  83) 
are  used.  In  order  that  the  two  types  of  vouchers  may  be 
easily  distinguished,  it  is  suggested  that  the  charge  voucher 
be  printed  in  red,  as  indicated  on  form. 

Charge  vouchers  should  be  numbered  from  1  up,  the 
same  as  the  purchase  vouchers,  and  the  back  page  of  the 
voucher  record  should  be  used  to  record  all  charge  vouchers, 
where  they  should  be  entered  in  the  same  manner  as  the 
purchase  vouchers.  In  paying  a  purchase  voucher  on  which 
a  charge  voucher  is  deducted  from  the  full  amount,  the 
number  of  the  check  should  be  placed  in  the  proper  column 
on  the  charge  voucher  record  in  the  same  manner  as  on  the 
purchase  voucher  record.  In  the  check  record  (Form  86) 
will  be  shown  in  the  "Accounts  Payable"  column  the  full 
amount  of  the  purchase  voucher,  and  on  the  "following  line, 
in  red  ink,  the  amount  of  the  charge  voucher  which,  being 
deducted,  leaves  the  amount  of  the  check  (except  for  cash 


248       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

discount).     This  amount  is  entered  in  the   "Net  Cash" 
column. 

In  case  a  claim  is  made  after  a  purchase  voucher  has 
been  paid,  and  there  are  no  other  purchase  vouchers  from 
the  same  concern  awaiting  payment,  a  charge  voucher  will 
be  used  to  adjust  the  claim,  an  invoice  being  sent  to  the 
purchase  creditor  to  notify  him  of  this  claim.  If  this  invoice 
be  paid  in  cash,  the  amount  should  be  entered  on  the  incom- 
ing cash  sheet  (Form  85),  and  extended  in  the  sundry 
column;  the  date  of  payment  and  "Cash  Received"  folio  will 
then  be  posted  to  the  charge  voucher  record  and  to  the 
credit  of  the  "Accounts  Payable"  column.  "Deductions" 
column  on  the  purchase  voucher  should  be  used  whenever 
possible,  to  keep  the  number  of  charge  vouchers  within  the 
smallest  possible  limits.  Charge  vouchers  should  be  ap- 
proved by  some  authorized  person,  and  filed  directly  behind 
the  purchase  vouchers  from  which  they  are  to  be  deducted. 

Voucher  Record 

The  voucher  record  (Form  84)  provides  for  the  date 
of  the  voucher,  the  voucher  number,  and  the  name  of  the 
creditor.  These  particulars  must  be  entered  in  the  voucher 
record  when  making  the  first  entry.  The  extensions  into 
the  money  columns  on  the  voucher  record  should  not  be 
made  until  the  voucher  is  closed  out,  usually  at  the  end  of 
the  month.  When  closed,  the  total  amount  of  the  voucher 
is  entered  in  the  "Accounts  Payable"  column  and  the  total 
of  this  column  credited  to  this  account  in  the  private  ledger. 
Voucher  record  sheets  should  be  numbered  consecutively 
and  each  sheet  accounted  for. 

At  the  end  of  the  month,  as  soon  as  the  total  amount  of 
any  voucher  is  entered  in  the  "Accounts  Payable"  column, 
it  is  extended  in  the  distribution  columns  to  the  accounts 
to  which  it  should  be  charged.    As  all  bills  received  by  the 


COMMERCIAL    OR    OFFICE    ACCOUNTING  o^n 

company  are  either  for  material  or  expense,  and  as  all 
material  (with  the  possible  exception  of  ofHce  supplies)  is 
charged  to  "General  Stores,"  the  distribution  columns  pro- 
vided in  the  form  are  sufficient.  These,  as  will  be  seen  by 
the  captions,  correspond  to  the  controlling  accounts,  to 
which  the  total  under  each  caption  must  be  charged  monthly 
in  the  private  ledger. 

All  material  bought,  with  the  exceptions  noted  above,  is 
charged  direct  to  "General  Stores,"  and  expense  divided 
between   "General   Expense"   and    "Advanced   Expense." 
^'General  Expense"  will  be  divided  into  "Commercial"  and 
"Overhead."    Commercial  expense  is  that  which  applies  to 
the  commercial  or  office  end  of  the  business,  and  the  items 
from  this  column  will  be  charged  to  the  various  subsidiary 
accounts,  as  wiU  be  explained  under  "Commercial  Expense 
Distribution    Sheet"    (page   258).      To   the    "Overhead" 
column  will  be  posted  all  items  of  expense  which  are 
applicable  to  the  manufacturing  end  of  the  business,  for 
distribution  to  subsidiary  accounts,  as  explained  in  Chapter 
XII,  under  "Factory  Overhead  Sheet  for  Distributions." 
In  the  "Advanced  Expense"  column  will  be  charged  all 
expei  -es  the  full  benefit  of  which  does  not  accrue  during 
the  current  month,  but  which  are  prorated  into  actual  ex- 
pense charges  for  the  period  of  time  to  which  they  properly 
belong.    In  the  sundry  column  will  be  entered  the  distribu- 
tion of  any  items  on  a  voucher  which  cannot  be  charged  to 
any  of  the  previous  accounts. 

It  is  not  necessary  to  post  each  individual  check  imme- 
diately it  is  made  out  in  payment  of  a  voucher,  as  the  check 
record  (Form  86)  shows  the  voucher  number  covered  by 
the  check.  It  is  advisable,  however,  to  post  the  check  record 
mto  the  voucher  record  daily,  entering  in  the  voucher  record 
the  "Date  Paid,"  the  "Check  Record  Folio,"  and  the 
"Check  Number." 


250       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 
Incoming  Cash  Sheet 

This  sheet  (Form  85)  is  designed  for  a  record  of  cash 
received  by  the  company,  and  all  cash  received  should  be 
entered  thereon.  It  takes  the  place  of  the  debit  side  of 
what  would  otherwise  be  the  ordinary  cash  book  which,  in 
this  system  of  accounting,  is  not  used.  For  purposes  of 
auditing,  these  cash  received  sheets  are  numbered  con- 
secutively when  printed,  and  every  sheet  is  to  be  accounted 
for,  whether  it  is  used  or  not.  In  case  of  error  in  making 
an  entry,  it  should  not  be  erased  but  a  red  line  should  be 
drawn  through  the  entry.  The  purpose  of  the  various 
columns  are  explained  below. 

Net  Cash.  Each  day  the  exact  amount  of  cash  received 
from  whatever  source  must  be  entered  in  the  "Net  Cash" 
column  and  deposited  in  the  bank ;  the  total  of  these  items, 
at  the  end  of  each  month,  is  charged  to  the  controlling  ac- 
count A-1,  "Cash  in  Banks"  (see  Form  92),  in  the  private 
ledger. 

Discount  on  Sales.  In  this  column  are  entered  all  cash 
discounts  taken  by  and  allowed  to  customers.  If,  for  any 
reason,  a  discount  is  taken  but  is  not  allowed,  the  check 
should  be  returned  to  the  customer  for  correction  and  no 
entry  made.  At  the  end  of  the  month,  the  total  of  this 
column  is  charged  to  the  subsidiary  commercial  or  office 
expense  account,  "Discounts  Allowed." 

Freight  and  Express—Commercial.  In  this  column  will 
be  entered  all  freight  charges  which  have  been  deducted  by 
customers  and  allowed.  In  case  freight  deduction  is  not 
allowed,  the  remittance  should  be  returned  and  no  entry 
made.  The  total  of  this  column  at  the  end  of  the  month  is 
charged  to  the  subsidiary  commercial  or  office  expense  ac- 
count, "Freight  and  Express— Commercial." 

Sundry.  The  "Sundry"  column  is  for  any  other  charge 
items  not  specifically  provided  for  on  this  sheet,  such  as 


COMMERCIAL    OR    OFFICE    ACCOUNTING 


251 


interest   paid,    special   deductions   allowed   to   customers, 
etc. 

All  advanced  expense  interest  should  be  prorated 
monthly,  the  same  as  other  advanced  expenses,  and  dis- 
tributed on  an  advanced  expense  prorating  sheet,  over  the 
months  covered. 

Accounts  Receivable.  In  this  column  is  entered  the 
total  amount  which  should  be  credited  to  customers ;  there- 
fore, each  amount  in  this  column  must  include  not  only  the 
net  cash  received,  but  all  discounts  and  deductions  taken  by 
customers  and  allowed,  as  specified  in  the  foregoing  columns. 
The  total  of  this  column  at  the  end  of  the  month  is  credited 
to  the  controlling  account  A-3,  "Accounts  Receivable,"  in 
the  private  ledger. 

Notes  Receivable.  In  this  column  is  entered  the  face 
value  of  any  notes  receivable  paid,  but  not  interest  received 
on  these  notes.  The  total  of  this  column  is  credited  monthly 
to  controlling  account  A-7,  "Notes  Receivable,"  in  the 
private  ledger. 

It  is  a  much  better  plan  to  handle  notes  receivable  on 
the  income  cash  sheet  than  by  journal  entry  or  by  posting 
direct  from  the  notes  book,  if  one  is  kept.  In  this  way, 
the  face  of  the  note,  if  discounted,  is  entered  in  the  "Notes 
Receivable"  column  on  the  credit  side  of  the  incoming  cash 
sheet,  and  the  amount  of  discount  in  the  "Advanced 
Expense"  column  on  the  debit  side.  This  also  applies  to 
customers*  notes  discounted  by  the  company,  which  are 
entered  to  the  credit  of  "Notes  Receivable"  on  the  incoming 
cash  sheet,  and  the  interest  charged  in  "Sundry"  column  to 
"Advanced  Expense  Interest." 

Notes  Payable.  In  this  column  are  entered  the  face 
amounts  of  any  of  the  company's  notes  which  are  discounted, 
the  discount  being  charged  to  Advanced  Expense  and  pro- 
rated aver  the  period  covered.     The  total  of  this  column 


252       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

at  the  end  of  the  month  is  credited  to  the  controlling  account 
D-3,  "Notes  Payable,"  in  the  private  ledger. 

Interest  Received.  In  this  column  will  be  entered  all 
interest  received.  At  the  end  of  the  month,  the  total  of  this 
column  is  carried  to  the  subsidiary  commercial  or  office 
expense  credit  account,  "Interest  Received." 

Sundry  Accounts.  This  column  should  contain  the 
name  and  amount  of  any  item  for  which  a  check  may  have 
been  received  and  which  would  not  come  under  any  of  the 
previous  captions.  In  the  monthly  posting  of  this  column 
to  the  controlling  accounts  of  the  private  ledger,  it  must 
be  analyzed,  hence  the  necessity  of  enumerating  the  items 
by  name. 

Folio.  In  the  folio  column  can  be  written  the  initial  of 
the  bank  in  which  each  check  is  deposited,  and,  if  desired, 
the  date  of  deposit,  the  total  checks  to  one  bank  each  day 
checking  with  the  amount  of  deposit  on  the  check  record. 
The  incoming  cash  sheets  should  be  proved  at  the  bottom 
of  each  page  to  see  that  the  charge  side  balances  with  the 
credit. 

Check  Record 

The  check  record  (Form  86)  is  used  for  recording  all 
checks  drawn,  it  being  understood  that  all  cash  disburse- 
ments are  provided  for  by  a  petty  cash  system.  In  connec- 
tion with  this  check  record,  checks  must  be  used  in  pads, 
each  check  being  numbered  consecutively.  If  a  check  is 
spoiled  or  is  not  used  after  being  made  out,  the  space  for 
this  check  in  the  check  record  must  be  marked  "Void,"  as 
every  check  must  be  accounted  for. 

The  voucher  number  is  entered  in  the  check  record, 
following  the  check  number.  No  detail  distribution,  such 
as  labor,  material,  various  kinds  of  expenses,  etc.,  is  pro- 
vided for  in  the  check  record,  as  is  common  in  the  ordinarv 


COMMERCIAL    OR    OFFICE    ACCOUNTING 


253 


cash  book,  because  the  voucher  record  is  used  for  all  such 
distributions,  and  there  must  be  a  voucher  for  all  disburse- 
ments.   In  this  way  distributions  are  all  made  at  one  place. 
The  columns  of  the  check  record  are  discussed  below. 
Net  Cash.    In  this  column  are  entered  the  exact  amounts 
of  the  checks  drawn,  the  total  of  which,  at  the  end  of  the 
month,  is  carried  to  the  credit  of  the  controlling  account 
A-1,  "Cash  in  Bank"  (see  Form  92),  in  the  private  ledger. 
Discount   Purchases.     In  this  column  is  entered  the 
amount  of  any  discount  taken  from  purchases  when  paid, 
as  called  for  on  the  voucher  for  which  the  check  is  drawn. 
The  total  of  this  column,  at  the  end  of  the  month,  is  carried 
to  the  commercial  expense  credit  account,  "Cash  Discount 
Earned." 

Accounts  Payable.  In  this  column  is  entered  the  total 
amount  which  is  to  be  charged  to  the  voucher  record,  that 
is,  it  covers  the  cash  paid  and  also  the  discounts  taken.  The 
total  of  this  column  at  the  end  of  the  month  is  charged  to 
the  controlling  account  D-1,  "Accounts  Payable,"  in  the 
private  ledger. 

Notes  Payable.  In  this  column  are  entered  the  amounts 
of  all  notes  paid  by  the  company.  At  the  end  of  the  month 
the  total  is  charged  to  the  controlling  account  D-3,  "Notes 
Payable,"  in  the  private  ledger. 

Sundry  Accounts.  The  "Sundry  Accounts"  column  pro- 
vides a  place  for  entering  the  name  and  amount  of  any 
item  for  which  a  check  may  have  been  drawn,  and  which 
would  not  come  under  any  of  the  previous  captions.  A 
monthly  posting  is  made  of  this  column  to  the  controlling 
accounts.  It  must  be  analyzed  according  to  the  items 
enumerated,  hence  the  necessity  of  entering  the  details  in 
this  column. 

Deposits.  In  the  deposit  column  will  be  entered  the 
amount  of  each  bank  deposit.     The  total  amount  of  this 


254       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

column,  or  columns  in  case  more  than  one  check  record  is 
kept,  should  agree  with  the  "Net  Cash"  column  on  the 
cash  received  sheet. 

Balance.  The  daily  balances  of  "Cash  in  Bank"  should 
be  shown  in  this  column.  A  separate  check  record  must  be 
kept  for  each  bank  in  which  an  account  is  carried,  and  a 
distinct  series  of  numbers  used  for  each  check  record  sheet, 
as  well  as  for  checks. 

When  checks  are  drawn  upon  one  bank  for  the  purpose 
of  transferring  money  to  another  bank,  the  amounts  should 
be  entered  in  the  sundry  column  of  the  check  record  sheet 
of  the  bank  from  which  the  amount  is  withdrawn.  Thev 
should  also  be  entered  on  the  incoming  cash  sheet,  and  in 
the  "Deposits"  column  of  the  check  record  sheet  of  the 
bank  to  which  the  amount  is  transferred.  At  the  end  of 
each  month,  cash  received  and  cash  paid  out  will  be  re- 
capitulated upon  the  final  cash  received  sheets  for  the  month, 
and  postings  made  from  this  recapitulation  to  the  private 
ledger  accounts. 

Petty  Cash  Record  and  Voucher 

For  the  handling  of  petty  cash,  what  is  commonly  known 
as  the  "Imprest  System"  is  recommended.  In  order  to  carry 
this  out,  the  cashier  must  be  provided  with  some  fixed  fund, 
anywhere  from  $200  to  $500,  or  with  an  amount  sufficient 
to  cover  expenditures  of  this  character  for,  say,  one  month. 
This  should  be  considered  as  a  cash  drawer  fund,  to  be 
accounted  for  by  cash  in  drawer,  plus  amount  of  any  petty 
cash  vouchers  not  yet  turned  in  for  refund. 

The  amount  of  this  fixed  fund  appears  as  a  standing 
charge  in  Petty  Cash  account  (A-2)  in  the  private  ledger, 
and  it  can  be  affected  only  by  an  increase  or  decrease  in 
the  original  amount  of  petty  cash.  The  checks  issued  to 
reimburse  petty  cash  fund  for  its  expenditures  are  not 


COMMERCIAL    OR    OFFICE    ACCOUNTING 


253 


charged  to  the  controlling  account  "Petty  Cash,"  but  are 
simply  entered  in  the  "Receipts"  column  in  the  petty  cash 
book  or  petty  cash  disbursements  sheet  (Form  88).  The 
balancing  charges  for  the  outgoing  cash  are  made  monthly 
from  the  petty  cash  book,  as  explained  later. 

In  order  to  secure  a  complete  record  of  all  petty  cash 
expenditures,  a  petty  cash  voucher  has  been  provided,  to 
be  used  in  conjunction  with  the  petty  cash  record.  (See 
Forms  87,  88.)  These  vouchers  are  to  be  numbered  con- 
secutively and  each  one  must  be  accounted  for.  In  case  of 
an  error  in  making  them  out,  they  should  not  be  destroyed, 
but  marked  "Void,"  and  filed  with  the  paid  vouchers. 

One  of  these  petty  cash  vouchers  should  be  made  out 
for  each  item  of  cash  expended,  and  must  always  be  signed 
by  the  person  to  whom  the  money  is  paid.  It  will  then  be 
entered  in  the  petty  cash  book,  under  the  distribution  ac- 
count number  to  which  it  is  to  be  charged.  If  the  voucher 
is  in  payment  of  an  invoice,  the  invoice  will  be  indorsed 
with  the  date  paid  and  the  petty  cash  voucher  number.  This 
invoice  should  be  approved  by  the  proper  authority  before 
being  paid.  The  voucher,  together  with  the  invoice,  will 
then  be  placed  in  the  cash  drawer  in  place  of  the  cash 
paid  out. 

Each  night,  the  cash  in  the  drawer  must  be  counted 
and  the  sum  of  this,  plus  the  vouchers  in  the  drawer,  must 
agree  with  the  standing  amount  charged  to  petty  cash. 

When  the  cash  in  the  drawer  becomes  low,  or  at  stated 
periods,  say  once  a  month  or  once  a  week  as  may  be  found 
the  more  advantageous,  a  check  is  drawn  to  the  order  of 

petty  cash  in  payment  of  "Petty  Cash  Vouchers,  No 

to  No "for  the  exact  amount  of  these  vouchers.    This 

check  will  be  cashed  and  the  money  placed  in  the  drawer, 
bringing  the  funds  back  again  to  the  original  amount.  A 
check  drawn  to  reimburse  this  fund  will  be  entered  in  the 


256       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

check  record  in  the  sundry  column,  and  will  be  a  non-post- 
ing item,  the  postings  being  the  monthly  totals  of  the 
distribution  columns  in  the  petty  cash  book,  which  are 
posted  to  the  controlling  or  subsidiary  accounts,  as  the  case 
may  be.  The  redeemed  vouchers  must,  of  course,  have 
first  been  extended  in  the  petty  cash  book,  as  explained 
above. 

It  must,  of  course,  be  remembered  that  on  the  last  day 
of  each  month,  all  petty  cash  vouchers  which  have  been 
extended  in  the  petty  cash  book  must  be  reimbursed  by 
check.  If  this  is  not  done,  the  distribution  of  these  on  the 
petty  cash  book  will  throw  the  books  out  of  balance. 

It  will  also  be  understood  that  all  cash  received  must 
be  deposited  in  the  bank  and  never  be  diverted  into  petty 
cash.  In  case  stamps  are  received  from  customers  in  the 
settlement  of  their  accounts,  the  petty  cash  drawer  should 
purchase  these  stamps  and  the  cash  so  received  for  them 
be  deposited. 

The  advantages  derived  from  the  use  of  the  petty  cash 
vouchers  and  records  are: 

1.  A  voucher  is  secured  for  every  petty  expenditure. 

2.  The  work  of  balancing  the  petty  cash  is  minimized, 

as  there  is  always  a  definite  amount  against  which 
it  is  to  balance. 

3.  The  system  provides  a  means  for  correctly  making 

a  distribution  of  all  petty  cash  expended  and  the 
absorption  of  these  expenditures  into  the  proper 
general  accounts. 

Journal  Register 

Modern  accounting  has  almost  done  away  with  the 
once  much  used  general  journal,  by  dividing  it  up  into  books 
of  special  functions  wherever  the  volume  of  similar  items 
has  sufficiently  increased  to  make  it  possible.     All  of  the 


COMMERCIAL    OR    OFFICE    ACCOUNTING         257 

foregoing  forms  are  examples  of  this  practice.  There  is, 
however,  some  necessity  for  journalizing  in  a  general  way,' 
and  in  connection  with  the  foregoing  it  is  recommended 
that  a  journal  register  be  used,  somewhat  similar  to  that 
shown  in  Form  89. 

It  will  be  noted  that  columns  have  been  provided  for 
the  more  frequently  used  accounts,  i.e.,  accounts  receivable, 
accounts  payable,  notes  receivable,  notes  payable,  and  a 
sundry  column,  for  any  miscellaneous  entries.  In  this 
manner  the  monthly  totals  can  be  posted  instead  of  each 
individual  item. 

Journal  Voucher 

In  connection  with  the  journal  register,  a  journal 
voucher  (Form  90)  has  been  provided  for  making  journal 
entries  of  all  kinds,  thus  affording  a  means  for  properly 
authorizing  these  entries.  These  journal  vouchers  must 
be  numbered  in  sequence  and  filed  in  a  binder  provided  for 
them  and  every  number  must  be  accounted  for.  If,  for 
any  reason,  one  is  spoiled  by  accident  or  otherwise,  it  must 
be  marked  "Void"  and  filed  in  the  binder  in  its  place  of 
sequence. 

General  Ledger 

A  general  ledger  should  be  provided,  in  loose-leaf  form, 
to  be  used  as  a  subsidiary  book  to  the  private  ledger.  This 
ledger  should  not  be  filled  with  the  miscellaneous  accounts 
so  frequently  put  into  a  general  ledger,  but  should,  on  the 
contrary,  contain  little  else  besides  the  accounts  included  in 
the  analysis  of  commercial  or  office  expenses  (see  page 
258),  and  those  included  in  the  analysis  of  factory  over- 
head (see  under  Chapter  XII),  all  of  which  are  a  part  of 
the  monthly  balance  sheet  sets. 

The  accounts  in  the  general  ledger  should  be  opened  in 


2  eg       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

the  order  given  on  the  monthly  balance  sheet  so  that  in 
taking  off  the  balances  at  the  end  of  the  month  they  will 
conform  to  the  same  order  of  arrangement. 

All  of  the  accounts  under  analysis  of  commercial  or 
oflfice  expense  must  be  closed  out  each  month  into  Com- 
mercial Expense  account,  J-1  (see  Form  92).  The  total 
of  each  amount  in  the  analysis  of  factory  overhead  must 
be  closed  out  each  month  into  Overhead  account,  J-2.  These 
accounts  do  not  need  to  be  journalized  by  individual  items; 
they  are  to  be  simply  balanced  out  each  month  into  Com- 
mercial Expense  and  to  Overhead.  In  other  words,  these 
accounts  are  simply  the  totals  of  the  columns  on  the  distri- 
bution sheets,  and  cover  in  total  the  items  entered  in  detail 
in  the  corresponding  columns. 

Commercial  Expense  Distribution  Sheet 

The  detail  of  -his  analysis,  by  captions,  is  also  illustrated 
on  the  set  of  balance  sheets  in  Form  1,  the  latter  showing 
the  divisions  as  between  ''General  Commercial  Expense" 
and  "Selling  Expense."  The  commercial  expense  distribu- 
tion sheet  is  in  reality  a  general  ledger  sheet  and  contains 
the  general  ledger  entries  for  an  analysis  of  commercial 
expense  which  is  to  be  carried  in  total  monthly  to  Profit 

and  Loss. 

Comparison  is  made  in  the  summaries  of  these  accounts 
to  show:  first,  the  percentage  of  commercial  expense  as  a 
whole  to  sales,  and,  second,  the  percentage  of  selling  expense 

as  such  to  sales. 

Attention  is  again  called  here  to  the  value  of  these 
percentages  as  a  guide  in  conducting  a  business.  If  balance 
sheets  similar  to  those  illustrated  in  this  work  have  been 
used  for  a  period  of  some  months  or  years,  a  number  of 
definite  percentage  values  will  have  been  discovered.  For 
instance,  if  it  is  known  that  the  commercial  percentage 


COMMERCIAL    OR    OFFICE    ACCOUNTING 


259 


averages  12%  a  month,  this  indicates  what  the  normal  con- 
dition of  business  should  be,  and  the  accounting  methods 
herein  illustrated  make  possible  an  analysis  to  determine 
the  cause  for  any  variations  of  this  percentage. 

What  has  been  said  of  commercial  percentages  also 
applies  to  selling  expense.  If  it  is  known  that  the  average 
selling  expense  is  8%  of  the  total  sales,  it  is  only  natural  to 
look  for  a  variation  from  this  as  a  first  point  of  interest 
each  month,  and  then  to  determine  the  cause  for  any  such 
variation. 

The  same  conditions  apply  to  overheads.  If  overheads 
are  running  at  an  average  of  80%  and  variation  takes  place, 
these  accounting  methods  provide  an  analytical  means  for 
determining  the  cause  therefor.  With  the  assurances  that 
these  percentages  are  reasonably  correct,  any  executive  may 
always  start  a  detail  examination  of  his  monthly  balance 
sheets  with  a  comfortable  feeling. 

General  Commercial  Expense 

It  will  be  noted  that  each  column  on  the  commercial 
expense  sheet  (Form  91 )  is  numbered  with  its  account  num- 
ber. The  following  is  a  brief  description  of  the  charges 
which  are  made  to  each  account: 

Salaries — Officers.  This  account  should  include  the 
salaries  of  the  general  officers  of  the  company,  and  all  other 
officers,  such  as  works  manager  or  superintendent,  office 
superintendent,  purchasing  agent,  comptroller,  industrial 
secretary,  publicity  agent,  etc. 

Salaries — Clerical.  This  account  should  include  all  the 
clerical  labor  of  the  office,  including  stenographers  and 
typewriters. 

Labor — General.  This  account  will  include  all  labor  in 
the  office  which  cannot  be  classified  as  clerks  or  officers, 
such  as  messenger  boys,  janitors,  watchmen,  etc. 


26o       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Telegraph  and  Telephone.  This  account  must  be  made 
to  cover  all  telegraph  and  telephone  expense  chargeable  to 
the  office  end  of  the  business,  but  should  not  include  any 
items  which  are  chargeable  to  the  engineering  or  manufac- 
turing departments. 

Office  Supplies.  This  account  includes  all  supplies,  such 
as  stationery,  printed  forms,  books,  pencils,  etc.,  required 
for  use  in  the  general  office. 

Taxes— Corporation.  This  account  will  include  all  cor- 
poration taxes  and  whatever  proportion  of  other  taxes  might 
properly  belong  to  the  general  office,  but  should  not  include 
taxes  on  the  factory  buildings  or  personal  property,  such 
as  stock  on  hand.  The  general  office  taxes  will  appear  on 
the  sheet  as  a  monthly  prorated  account. 

Legal  Expenses.  This  account  covers  everything  in  con- 
nection with  legal  work  as  differentiated  from  patent  work; 
that  is,  it  is  to  cover  all  suits,  litigations,  collections,  etc., 
not  in  any  way  connected  with  patents. 

Patent  Expenses.  This  account  relates  to  everything 
in  connection  with  the  obtaining  and  the  defense  of  patents. 
It  covers  not  only  the  patent  fees  to  the  government,  but 
also  patent  attorneys'  fees,  as  well  as  the  cost  of  all  litiga- 
tion of  any  character  whatsoever  in  connection  with  patents. 

Royalties.  To  this  account  will  be  charged  any  and  all 
royalties  paid  for  a  product  and  sold  by  virtue  of  such  pay- 
ment. They  are  treated  as  commercial  expense  lor  the 
reason  that,  while  they  may  theoretically  constitute  an 
additional  cost  to  an  article,  they  have  nothing  to  do  with 
manufacturing  operations,  either  as  labor,  material,  or  ex- 
pense. In  other  words,  royalties  are  never  paid  for  the 
privilege  of  manufacturing  something,  but  for  the  privilege 
of  selling  something  on  which  a  profit  may  be  realized,  and 
for  this  reason  they  rightfully  belong  to  selling  expense. 

Freight  and  Express — Commercial.     To  this  account 


COMMERCIAL    OR    OFFICE    ACCOUNTING  261 

should  be  charged  freight  and  express  chargeable  to  the 
commercial  or  office  end  of  the  business.  This  should  in- 
clude freight,  express,  and  parcel  post  charges  on  goods 
delivered  to  customers,  as  the  delivery  of  goods  is  a  com- 
mercial transaction  and  should  not  be  charged  to  the  manu- 
facturing end  of  the  business. 

Insurance  on  Stock.  This  should  be  charged  to  the  com- 
mercial end  of  the  business,  inasmuch  as  it  has  nothing  to 
do  with  manufacturing,  simply  being  a  warehousing  item 
for  the  benefit  of  a  sales  or  similar  department. 

Interest  Paid.  This  account  must  be  made  to  include 
interest  paid  on  notes,  etc.,  shown  in  sundry  column  on  the 
voucher  record,  also  as  shown  in  the  sundry  column  on  the 
check  record. 

Discount  Allowed.  This  account  is  intended  to  cover 
all  cash  discounts  taken  by  customers  in  their  remittances, 
as  entered  on  incoming  cash  sheet,  and  will  be  the  total  of 
the  ''Discount  Sales"  column  on  that  sheet. 

Rent.  This  account  is  to  cover  any  and  all  rentals  paid 
for  floor  space  for  commercial  or  office  purposes. 

Commercial  Reserves.  This  account  consists  of  such 
depreciation  items  as  apply  to  office  furniture,  fixtures, 
patents,  bad  debts,  etc. 

Expenses  Unclassified.  This  account  is  meant  to  cover 
any  and  all  small  items  not  chargeable  to  any  of  the  above 
accounts,  but  which  belong  to  the  general  commercial  end 
of  the  business. 

Selling  Expense 

In  all  businesses  it  is  well  to  divide  commercial  expense 
into  two  classifications,  one  covering  general  commercial 
expense,  and  the  other  selling  expense  which  will  include 
only  such  expense  as  is  directly  chargeable  to  the  selling 
end  of  the  business  as  indicated  below. 


262       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Salaries — Salesmen.  This  account  should  include  the 
total  amount  of  salaries  paid  to  salesmen,  and  must  not  be 
confused  with  salaries  in  connection  with  clerical  or  other 
work. 

Labor — General.  This  account  will  cover  any  and  all 
labor  employed  by  the  sales  departments  in  and  around  the 
office,  factory,  warehouse,  etc.,  which  is  directly  under  the 
control  of  the  sales  department. 

Commission  on  Sales.  To  this  account  should  be 
charged  all  payments  to  salesmen  on  commission  for  making 
sales  of  goods,  as  distinguished  from  those  salesmen  em- 
ployed on  salary.  Where  a  salesman  is  employed  on  a 
salary  and  commission  basis,  the  amount  paid  must  be  dis- 
tributed accordingly. 

Traveling.  This  account  will  show  all  expense  incurred 
by  traveling  salesmen,  including  hotel  bills,  railroad  fares, 
etc.,  and  should  be  checked  and  audited  from  regular  sales- 
men's expense  account  books,  or  forms  of  some  kind. 

Entertainment.  This  account  is  intended  to  include 
entertainment  expense  incurred  for  the  purpose  of  making 
sales,  sales  contracts,  etc.,  either  by  the  company's  officers 
or  others. 

Rebates  and  Allowances.  To  this  account  will  be 
charged  all  rebates  or  other  allowances  made  to  customers 
as  a  matter  of  sales  policy,  but  it  should  not  include  any 
rebates  to  customers  for  claims  made  by  them  which  are 
chargeable  to  the  manufacturing  end  of  the  business,  such 
as  claims  for  defective  material,  workmanship,  etc. 

Shows  and  Demonstrations.  To  this  account  should  be 
charged  any  expense  of  shows  or  demonstrations  for  the 
purpose  of  selling  goods,  provided  they  are  not  in  any  way 
chargeable  to  regular  routine  business.  This  form  of  ex- 
pense is  generally  covered  by  an  appropriation  of  some  kind 
and  should  be  checked  up  accordingly. 


COMMERCIAL    OR    OFFICE    ACCOUNTING         263 

Postage.  This  account  covers  postage  on  mail  leaving 
the  office  relative  to  making  sales,  advertising  matter, 
catalogues,  etc. 

Office  Supplies.  To  this  account  should  be  charged  all 
items  covering  general  office  material  chargeable  to  the 
selling  department,  such  as  stationery,  forms,  pencils,  books, 
etc.,  whether  such  items  are  used  in  the  office  or  by  men  on 
the  road. 

Advertising.  Advertising  is  divided  into  three  classes: 
periodicals,  circulars,  and  catalogues.  For  distribution  pur- 
poses, a  charge  account  should  be  created  for  each  one  of 
these  items  and  the  proper  amount  charged  to  each  of  them. 
In  connection  with  circulars  and  catalogues,  it  should  be 
borne  in  mind  that,  if  say  100,000  catalogues  are  purchased 
which  might  last  for  a  year  or  more,  the  expense  for  them 
should  not  all  be  charged  up  when  they  are  received,  but 
they  should  be  brought  into  an  inventory  of  general  stores 
and  prorated  monthly  for  a  period  of  one  year  at  least,  if 
not  two.  Many  claim  that  catalogue  valuations  should 
extend  for  at  least  a  year  beyond  the  time  of  complete 
delivery  to  the  public. 

Selling  Expense  Unclassified.  This  is  simply  an  account 
containing  such  small  items  as  are  not  chargeable  to  other 
accounts. 

Commercial  or  Office  Expense  Credits 

As  it  is  desirable  to  keep  the  actual  expense  separate 
each  month  from  any  credits  obtained  by  the  commercial 
or  office  end,  it  is  advisable  to  keep  all  interest  received  and 
discounts  earned  entirely  separate  from  interest  paid  and 
discounts  allowed.  This  is  done  in  order  that  executives 
may  see  the  exact  conditions  in  both  respects;  therefore, 
separate  accounts  should  be  provided  in  the  general  ledger 
for  these  credits,   rather  than  combining  them  with  the 


264       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

debits  under  general  heads.  The  following  accounts  should 
be  provided  for  their  entry: 

Interest  Received.  This  account  represents  the  "Interest 
Received"  column  of  the  incoming  cash  sheet,  and  should, 
in  addition  to  the  usual  interest  credits,  include  all  interest 
received  by  the  company  for  any  delinquent  sales  or  contract 
accounts. 

Cash  Discount  Earned.  This  account,  representing  the 
discount  on  purchases  as  shown  on  the  check  record,  covers 
all  discounts  earned  by  the  financial  department  due  to 
discounting  accounts  payable. 

Credits  Unclassified.  This  account  should  be  carried 
in  the  general  ledger,  to  include  any  credit  item  not  provided 
for  above  or  by  accounts  opened  subsequently. 

Analysis  of  Overhead 

The  sum-total  of  all  the  accounts  in  this  division  in  the 
general  ledger  will  be  posted  to  the  general  account  J-2  in 
the  private  ledger,  and  will  be  obtained  from  the  factory 
overhead  distribution  sheet  discussed  in  Chapter  XII. 

Accounts  Payable — Personal 

Under  this  subdivision  in  the  general  ledger  may  appear 
whatever  personal  accounts  it  is  absolutely  necessary  to 
carry,  and  they  will  go  into  the  corresponding  controlling 
accounts  in  the  private  ledger  if  it  is  found  necessary  to 
open  such  accounts. 

Other  accounts  than  those  previously  specified  can  be 
opened  in  the  general  ledger  from  time  to  time  as  necessity 
may  require,  but,  as  before  said,  the  general  ledger  should 
not  be  crowded  with  miscellaneous  accounts ;  all  such  items 
should  be  classified  in  the  voucher  record  or  the  journal 
register,  as  otherwise  the  analysis  of  the  monthly  expendi- 
tures could  not  be  accurately  made. 


CHAPTER  XIV 

CONTROLLING   ACCOUNTS 
NATURE;   ASSET  ACCOUNTS 

Illustrating  and  explaining  a  chart  of  con- 
trolling accounts,   and  giving  in  detail  the 
source  from  which  the  debits  and  credits  of 
each  asset  account  are  obtained. 


i 


CHAPTER  XIV 

CONTROLLING  ACCOUNTS 

NATURE;  ASSET  ACCOUNTS 

Purpose  of  Controlling  Accounts 

This  and  the  next  chapter  set  forth  in  detail  the  com- 
posifon  of  all  accounts  for  a  private  ledger,  as  per  chart 
^t'orm  y^_).  These  accounts  are  commonly  called  "Con- 
trollmg  Accounts,"  meaning  summary  accounts  that  will 
give  the  debit  or  credit  balance  of  the  values  with  which  they 
treat  entirely  independent  of  the  corresponding  subsidiary 
current  accounts  as  carried  in  current  ledgers 

For  instance,   account   No.   A-3,    "Accounts   Receiv- 
able    (see  Form  92),  is  made  up  by  taking  from  the  sales 
analysis  the  total  sales  for  the  month,  and  from  the  incom- 
ing cash  sheets  the  total  amount  of  cash  received  on  ac- 
count from  customers  for  the  month,  and  the  balance  of  the 
account  constitutes  the  amount  of  outstanding  accounts  re- 
ceivable.   This  figure  having  been  obtained,  the  bookkeeper 
in  charge  of  the  customers  ledger  should  draw  off  his  bal- 
ances for  comparison.     That  is  to  say,  he  totals  each  cus- 
tomer s  account,  adds  up  the  debit  balances  of  all  accounts 
any  credit  balances  being  deducted,  and  the  figure  thus 
obtained  must  agree  with  the  balance  of  the  controlling 
account.    If  it  does  not,  there  is  a  mistake  somewhere 

For  further  illustration,  what  has  been  said  of  "Ac- 
counts Receivable,"  also  applies  to  "General  Stores" 
(ti-1).     The  total  of  all  purchases  as  taken  from  the 

267 


268       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

voucher  record,  less  the  total  of  all  materials  which  have 
been  used  or  sold  as  taken  from  the  monthly  distribution 
and  sales  analysis  sheets,  represents  the  controlling  account 
inventory  of  general  stores.  To  prove  this,  the  stores 
recorder  may  be  asked  to  draw  off  the  inventory  values  of 
balances  on  hand,  as  shown  on  the  stores  records.  Theo- 
retically, these  figures  must  agree,  so  that  here  again  there 
is  absolute  control  of  materials,  as  information  is  drawn 
from  two  independent  sources. 

In  other  words,  the  balance  of  any  controlling  account 
can  be  checked  against  a  balance  obtained  from  an  entirely 
separate  source,  and  in  this  way  an  absolute  check  or  con- 
trol of  the  accounts  in  question  is  maintained. 

These  private  ledger  or  controlling  accounts  are  ar- 
ranged, as  shown  on  the  chart,  in  such  a  way  that  a  thirty- 
day  statement  of  the  business  in  its  entirety  and,  by  certain 
details,  can  be  easily  obtained.  Furthermore,  this  informa- 
tion is  in  statistical  form,  thus  giving  an  opportunity  to 
read  between  the  lines  of  figures  and  make  time  period  com- 
parison of  individual  items  as  well  as  totals,  as  illustrated 
in  Qiapter  II. 

In  addition,  these  controlling  accounts  supply  the  uni- 
fication required  between  cost  accounting  and  general  ac- 
counting. This  is  so  for  the  reason  that  many  of  these 
accounts  are  controlling  accounts  for  cost  work,  particu- 
larly those  pertaining  to  general  stores,  finished  stores, 
work  in  progress,  plant  betterments,  reserves,  deprecia- 
tions, etc. 

Again,  these  controlling  accounts  give  the  same  infor- 
mation monthly  that  older  methods  of  accounting  gave  but 
once  a  year;  consequently,  the  adjustments  in  prices  neces- 
sary to  keep  the  business  profitable  can  be  m^ade  twelve 
times  as  often  as  they  could  under  the  older  methods.  The 
value  of  this  is  incomparably  greater  than  its  cost. 


CONTROLLING    ACCOUNTS-NATURE  269 

It  will  be  understood,  of  course,  that  the  movement  in 
a  set  of  controlling  accounts  is  a  series  of  debits  and  credits, 
and  that  the  charging  of  any  one  account  with  an  item  of 
any  kind,  means  that  some  other  account  must  at  the  same 
time  have  a  credit  given  it,  and  this  exchange  of  items  by 
debits  and  credits  is  so  woven  together  as  to  form  a  con- 
tinuous and  complete  history  of  the  activities,  progress,  and 
finances  of  the  business. 

Chart  of  Controlling  Accounts 

In  order  to  show  the  classification  required  for  con- 
trolling accounts,  the  chart  given  in  Form  92  has  been  pre- 
pared.   On  this  appear  the  headings  and  divisions,  "Assets," 
"Liabilities,"  and  "Profit  and  Loss,"  and  under  them  the 
various  controlling  accounts  required  to  distribute  these 
primes  into  the  detail  necessary  for  intelligent  administra- 
tion.   The  chart  shows  by  its  arrangement  how  each  account 
obtains  its  number.     Each  one  of  these  accounts  is  de- 
scribed in  this  and  the  following  chapter.   The  charges  and 
credits  given  under  any  heading,  such  as  "Accounts  Re- 
ceivable," "General  Stores,"  or  "Profit  and  Loss,"  always 
signify  with  what  that  particular  account  is  to  be  charged 
or  credited,  indicating  in  each  instance  the  other  account 
involved,  which  is  to  be  credited  or  debited  as  the  case 
may  be. 

The  general  divisions  for  these  accounts  are  indicated 
by  letters,  each  general  division  then  being  subdivided  by 
numbers.  Also,  as  may  be  seen  by  the  following  illustra- 
tion, this  classification  is  identical  with  the  order  of  ar- 
rangement on  the  monthly  balance  sheet  described  in  Chan- 
ter IL*  ^ 


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which   these   forms   were   ri^S^fJ^^.V   ^* J"^  ^-a*^*"-  ^*^*    *^^*    ^^^   businesses   from 
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270      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


r 

! 


I' 


Assets 

A.  Current 

B.  Inventory 

C.  Investment 


Liabilities 

D.  Current 

E.  Reserves 

F.  Capital,    Bonds,   and   Mort- 

gages 


Profit  and  Loss 

G.    Revenues  (by  sales) 
H.   Costs  (of  sales) 
J.    Expenses 

K.    Profit   and   Loss    (monthly 
and  general) 

The  accounts  in  a  private  ledger  should  be  opened  in 
the  order  in  which  they  appear  upon  the  chart,  so  that  a 
trial  balance  taken  from  the  private  ledger  can  be  trans- 
ferred to  the  monthly  balance  sheet  and  profit  and  loss  state- 
ment with  the  least  possible  expenditure  of  time.  Any 
other  necessary  accounts  can  be  placed  in  their  appropriate 
class  on  the  chart.  All  entries  into  private  ledger  accounts 
must  be  made  by  journalizing,  and  all  such  entries  should 
be  properly  authorized  before  they  are  made. 

Classification  of  Asset  Accounts 

Primarily,  assets  always  divide  themselves  into  three 
captions,  as  illustrated: 

A.  Current,  which  relates  almost  exclusively  to  cash 

and  accounts  receivable. 

B.  Inventory,  which  relates  almost  exclusively  to  mov- 

able or  convertible  assets. 

C.  Investments,  which  relate  exclusively  to  assets  that 

are  either  permanent  or  are  consumed  in  factory 
operations,  such  as  real  estate,  machinery,  dies, 
jigs,  etc. 


CONTROLLING    ACCOUNTS-NATURE  o*tt 

2/1 

Classification  of  Liability  Accounts 

There  are  three  classes  of  liabilities,  namely:    D  Cur- 
rent; E.  Reserves;  and  F,  Capital,  Bonds,  and  Mortgages 

Current  liabilities  represent  moneys  payable  in  cash 
Within  a  definite  period  of  time,  usually  10  to  90  days 

Reserve  accounts  are  created  to  protect  capital  invest- 
ments by  crediting  these  accounts  periodically  with  an 
amount  from  surplus  or  profits  to  provide  for  the  wastage 
shrinkage,  or  obsolescence  of  the  assets  to  which  they  apply 
and  debiting  them  with  the  actual  loss  by  repairs  or  replace- 
ments on  such  assets.  In  this  way  the  asset  accounts  always 
show  the  original  purchase  or  cost  price,  while  the  corre- 
sponding reserve  account  indicates  the  amount  of  deprecia- 
tion or  wastage. 

Capital,  as  its  name  implies,  is  the  amount  invested  in 
order  that  a  business  may  be  created  and  conducted,  but  as 
It  IS  returnable  to  the  investor  under  certain  prescribed 
condition,  it  is  always  a  liability. 

Classification  of  Profit  and  Loss  Accounts 

Monthly  Profit  and  Loss  is  the  final  account  into  which 
go  the  profits  and  losses  resulting  from  all  monthly  trans- 
actions. Its  balance  is  at  once  transferred  to  Profit  and 
Loss  General.  Profit  and  Loss  General  account  establishes 
the  dividing  line  between  accounting  work  and  executive 
work.  In  other  words,  the  Profit  and  Loss  account  is  the 
final  expression  of  what  has  been  accomplished  and  this  is 
as  far  as  the  accountant  can  go  by  routine  methods.  It  now 
remains  for  the  executive  to  say  how  and  by  what  means 
the  results  shown  by  this  account  shall  be  disposed  of,  as 
per  the  surplus  and  dividend  accounts. 

To  arrive  at  the  above,  three  factors  are  to  be  consid- 
ered: VIZ..  revenues,  costs,  and  expenses,  as  shown  on  the 
chart. 


272       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Assets — A.  Current 

A-1.    Cash  in  Bank 

This  account  represents  the  total  amount  of  cash  on  de- 
posit in  all  banks.  If  an  account  is  carried  in  more  than 
one  bank,  a  separate  register  should  be  used  for  each  bank. 
All  checks  should  be  put  up  in  pad  form,  and  each  one  given 
a  separate  number.  When  a  check  is  spoiled  it  should  be 
marked  "Void"  and  so  indicated  on  the  check  register.  Any 
check  so  marked  must  be  turned  in  and  filed  in  its  proper 
serial  place  with  other  returned  checks ;  otherwise  an  audit 
is  always  questionable. 


Credit 

From  check  record,  with  all 
cash  paid  out  in  monthly 
totals. 


Charge 

From  incoming  cash  sheets, 
with  all  cash  received  in 
monthly  totals. 

Note:     All  cash  received  from  any  source  whatsoever  must 
be  deposited. 

The  balance  of  this  account  represents  the  total  amount 
of  cash  on  deposit  at  the  banks,  subject  to  reconciliation 
with  the  actual  bank  balances  as  shown  by  pass-books  after 
providing  for  the  outstanding  checks  and  undeposited  items. 
This  balance  should  be  proven  at  least  once  a  month  by  the 
use  of  a  "Bank  Reconciliation  Sheet." 

A- 2.    Petty  Cash 

This  account  represents  the  amount  of  office  cash  with 
which  to  pay  petty  expenses.* 


CONTROLLING    ACCOUNTS-ASSETS 


273 


Credit 

From  incoming  cash  sheets, 
with  the  amount  of  cash  re- 
ceived back  from  the  petty 
cash  fund  to  decrease  the 
account. 


Charge 

From  check  record,  on  open- 
ing the  account,  with  the 
definite  amount  determined 
upon  to  be  carried  as  petty 
cash. 

From  check  record,  with  any 
amount  drawn  to  increase 
permanently  the  account. 

Note:  Checks  to  reimburse  the  cashier  for  these  expenditures 
should  never  be  charged  to  this  account,  as  it  always  remains  con- 
stant unless  the  fund  is  purposely  increased  or  decreased. 

The  amount  of  cash  in  the  cash  drawer,  together  with 
any  properly  proven  petty  cash  vouchers  that  have  not  yet 
been  redeemed  by  the  general  cashier,  must  at  all  times  be 
equal  to  the  permanent  balance  of  the  Petty  Cash  account. 

A-3.    Accounts  Receivable 

This  account  is  the  controlling  account  of  the  customers 
ledgers.  Postings  are  made  at  the  end  of  each  month  in 
totals,  as  follows: 


•S«c  discussion  of  petty  cash  voucher  and  disbursements  sheet  in  Chapter  XIIL 


Charge 

From  sales  analysis,  with  the 
total  credit  sales  for  the 
month. 

From  journal  vouchers,  with 
charges  against  customers,  as 
shown  by  the  monthly  re- 
capitulations. 

From  check  record,  with  any 
amount  paid  to  customers  or 
for  their  accounts. 

From  petty  cash  book  with  any 
amounts  paid  to  customers  or 
for  their  accounts. 


Credit 

From  incoming  cash  sheets, 
with  the  total  amount  of  the 
"Accounts  Receivable"  col- 
umn. 

From  journal  vouchers,  with 
monthly  total,  as  per  recapitu- 
lation of  notes  receivable  from 
customers,  and  all  other  items 
credited  to  customers'  ac- 
counts not  mentioned  above. 


274 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


The  balance  of  this  account  is  the  outstanding  accounts 
receivable,  and  should  be  checked  against  the  customers 
ledgers  once  a  month. 

A-4.    Accounts  Receivable — Past  Due 

This  account  is  of  great  importance  as  a  matter  of  in- 
formation. If  accounts  are  past  due  to  any  great  extent,  it 
shows  either  one  or  all  of  three  things:  that  collections  are 
not  being  properly  cared  for,  that  bad  sales  are  being  made, 
or  that  general  financial  troubles  are  affecting  collections. 
In  some  lines  of  business,  accounts  past  due  become  interest- 
bearing  which  is  often  an  item  of  considerable  importance. 

Any  concern  can  determine  about  what  percentage  of 
accounts  is  always  legitimately  past  due  and  any  variations 
from  this  percentage  should  be  immediately  looked  into. 
The  account  is  handled  as  follows: 


Charge 

From  journal  voucher,  with  any 
or  all  accounts  which  are  ac- 
tually past  due. 


Credit 

From  incoming  cash  sheets, 
with  all  amounts  received  and 
classified  under  accounts  re- 
ceivable past  due,  as  shown 
by  the  analysis  of  the  sundry 
column. 


The  balance  of  this  account  is  the  outstanding  accounts 
receivable  past  due. 


A-^.    Accounts  Receivable — Consigned 

This  account  represents  the  amount  of  outstanding 
claims  on  goods  which  have  been  sent  out  on  consignment. 
In  other  words,  B-5,  Finished  Stores  (Branches),  would 
cover  any  and  all  goods  sent  out  on  consignment,  while 
account  A-5  represents  the  sales  which  have  been  made  on 
these  goods.    This  account  is  one  that  in  many  lines  of  busi- 


CONTROLLING    ACCOUNTS-ASSETS  275 

ness  must  be  watched  very  carefully  as  defalcation  has 
probably  been  made  more  often  through  it  than  in  any 
other  phase  of  business.  Accounts  Receivable-Con- 
signed  should  be  carried  as  follows: 


Charge 

From  journal  voucher,  with  all 
sales  of  consigned  goods. 


Credit 

From  incoming  cash  sheets, 
with  all  amounts  received  in 
cash  for  accounts  receivable 
(consigned)  as  shown  by  an- 
alysis of  the  sundry  column. 

The  balance  of  this  account  is  the  outstanding  accounts 
receivable  on  goods  consigned,  and  the  aggregate  balance 
of  the  consignment  customers  ledger  must  agree  with  this 
balance  and  must  be  proven  once  a  month. 

A-6.    Accounts  Receivable— Suspense 

This  account  should  be  carefully  analyzed.  Too  often 
unfortunately,  it  has  been  abused  by  carrying  in  it  accounts 
that  have  long  been  dead  and  past  any  possible  collection. 
1  his,  of  course,  creates  fictitious  assets. 

Accounts  Receivable— Suspense  should  be  charged,  and 
Accounts  Receivable  credited,  with  all  accounts  doubtful 
enoiigh  to  justify  the  transfer.  But  it  must  be  borne  in 
mind  that,  at  the  same  time,  the  individual  account  in  the 
customers  ledger  must  be  transferred  to  a  subsidiary  sus- 
pense account  in  that  ledger,  using  a  separate  sheet  for  the 
same.  Each  suspense  account  should  be  put  on  one  line 
and  all  these  items  should  appear  together  on  one  or  tv^ 
pages. 

Accounts  which  are  finally  found  uncollectible  should 
be  credited  to  this  suspense  account  and  charged  to  reserve 
for  bad  debts;  therefore,  the  construction  for  a  balance  is 
as  follows: 


2^6      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Charge 
From  journal  voucher,  with  ac- 
counts which  are  not  actually 
bad  though   of  problematical 
value. 


Credit 
From  journal  voucher,  with  all 
accounts  determined  to  be  ab- 
solutely uncollectible. 
From  incoming  cash  sheets,  with 
all  amounts  received  in  cash 
for  accounts  receivable  (sus- 
pense), as  shown  by  analysis 
of  the  sundry  column. 

The  balance  of  this  account  represents  the  actual  amount 
in  suspense  and  should  be  proven  at  least  once  a  month. 

A-7.     Notes  Receivable 

In  handling  this  account,  it  should  always  be  borne  in 
mind  that  if  notes  receivable  are  discounted,  the  full  amount 
of  the  note  must  be  entered  in  the  "Notes  Receivable    col- 
umn on  the  incoming  cash  sheets  and  the  discount  on  such 
notes  in  the  "Sundry"  column  on  the  charge  side  (see  torm 
85)      If  notes  receivable  are  held  for  payment,  however, 
the  amount  of  cash  received  in  payment  of  the  note  must  be 
credited  in  "Notes  Receivable"  column,  and  mterest  re- 
ceived on  these  notes  credited  in  the  "Interest  Received 
column  on  the  incoming  cash  sheet.    This  account  always 
represents  the  total  amount  of  notes  receivable  and  is  con- 
structed as  follows: 


Charge 
From  journal  or  notes  receiv- 
able book,  with  all  notes  re- 
ceived from  customers. 


Credit 

From  incoming  cash  sheets, 
with  all  notes  receivable  paid 
during  the  month. 

From  journal  voucher,  with  the 
notes  receivable  not  paid  at 
maturity.  The  amount  of 
such  notes,  plus  interest  ac- 
crued, is  then  charged  to  the 
persons  from  whom  the  notes 
were  originally  received. 


CONTROLLING    ACCOUNTS-ASSETS 

277 

The  balance  of  this  account  should  agree  with  the 
amount  of  notes  on  hand  and  should  be  proven  once  a 
month. 

A-8.    Advanced  Expense— Insurance 

This  is  only  another  name  for  what  is  commonly  termed 
unexpired  msurance.    One  account  may  cover  all  classes  of 
insurance  paid,  or  it  may  be  divided  into  different  accounts 
as  fire  msurance,  liability  insurance,  compensation  insur- 
ant, foreign  insurance,  etc.     It  is  shown  here  only  as  a 

Advanced  expense   (insurance)   is  an  expense  which 
cannot  be  charged  into  any  one  month.     In  other  words 
.f  msurance  is  paid  for  twelve  months  in  advance,  it  must 
be  prorated  over  the  twelve  months  for  which  it  is  paid 
Insurance  accounts  could,  of  course,  be  charged  into  a  gen- 
era   advanced  expense  account,  covering  many  expenses 
that  cannot  be  charged  into  any  one  month  but  must  be  pro- 
rated oyer  a  considerable  period  of  time.     Where  this  is 
done,  all  items  should  be  carefully  scheduled  in  an  advanced 
expense  prorating  book,  thus  showing  the  monthly  amount 
of  each  class. 

follott^""*^  Expense-Insurance  account  is  carried  as 


^'""'i^  Credit 

fori  rane      „  aTJce'  T °"h°"  °^  J"^"^  ^'^"^"-^ 

in  advance.  for  each  month,  as  per  sched- 

ule of  advanced  expense  pro- 
rating sheets. 

s«r,I?'  ''^'^"?  "!  ^^''  ^''°""'  '^'''^'  *^  amount  of  in- 
lyprorltbr      "^^'^'^^^'  '°  subsequent  periods  by  month- 


278 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


A-9.     Advanced  Expense — Advertising 

There  is  probably  no  account  under  assets  more  debated 
and  perhaps  more  debatable  than  this,  for  the  reason  that 
the  time  period  value  of  advertising  can  never  be  anything 
but  an  estimate.  Expenditures  of  this  kind  come  usually 
in  large  pa)mients  in  some  particular  month.  For  instance, 
invoices  may  be  received  and  paid  in  some  one  month  for 
$10,000  worth  of  catalogues;  this  does  not,  however,  meaii 
that  the  expenses  for  these  catalogues  should  be  charged 
up  to  that  particular  month.  On  the  contrary,  they  may 
constitute  a  year's  supply  and  should  be  prorated,  by  months, 
as  with  insurance.  This  principle  can  properly  be  applied, 
to  certain  forms  of  trade  journal  and  periodical  advertising, 
the  cost  of  which  should  be  spread  over  a  certain  period. 

Advanced  Expense — Advertising  account  is  handled  as 
follows: 


Charge 

From  voucher  record,  with  the 
total  amount  of  money  paid 
out  for  advertising  of  any- 
kind,  as  per  analysis  of  sundry 
column. 


Credit 

From  journal  voucher,  with  the 
monthly  proportion  of  these 
expenses,  as  per  schedule  of 
advanced  expense  prorating 
sheets. 


The  balance  of  this  account  shows  the  amount  of  ad- 
vanced expense  (advertising)  properly  chargeable  to  sub- 
sequent periods  by  monthly  proratings  and  should  frequently 
be  checked  against  the  balance  shown  on  the  prorating 
sheets. 

A-10.    Advanced  Expense — Salesmen 

This  account  is  practically  of  the  same  nature  as  account 
A-9,  ,and  represents  an  amount  of  money  charged  out 
which  is  as  yet  undistributed  and  which  must  come  back 


CONTROLLING    ACCOUNTS-ASSETS 


279 


on  vouchers  for  traveling  expenses.  When  these  vouchers 
come  in,  their  amounts  will  be  distributed  to  commercial 
expense,  as  shown  under  commercial  expense  analysis 
(Chapter  XIII). 

This  account  is  to  be  handled  as  follows: 


Charge 

From  voucher  record,  with  the 
total  amount  chargeable  to 
this  account  as  per  analysis  of 
sundry  column. 


Credit 

From  journal  voucher,  with  the 
monthly  charge  to  expense  or 
to  the  salary  account  of 
salesmen. 


The  balance  of  this  account  shows  the  amount  of  money 
advanced  for  expenses  and  still  in  the  hands  of  salesmen. 

A— 11.     Treasury  Bonds 

In  connection  with  this  account,  it  must  be  distinctly 
understood  that  treasury  bonds  are  those  that  have  once 
been  issued  but  later  taken  back  into  the  company's 
possession,  either  for  cash  or  for  liquidation  of  a  debt, 
and  that  the  term  does  not,  in  any  way,  designate  unissued 
bonds.    The  account  is  to  be  handled  as  follows: 


Charge 

From  journal  voucher,  with  any 
bonds  received  in  payment  of 
goods  or  other  indebtedness. 

From  voucher  record,  with  any 
money  paid  for  bonds  as  per 
sundry  column  analysis. 


Credit 

From  incoming  cash  sheets, 
with  any  cash  received  from 
the  sale  of  treasury  bonds. 


The  balance  of  this  account  represents  the  value  of  the 
treasury  bonds  on  hand. 

A-12.    Treasury  Stock—Preferred 

As  in  the  case  of  bonds,  treasury  stock  is  that  which  has 


28o       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

been  issued  and  then  taken  back  into  the  company's  pos- 
session. The  term  does  not,  in  any  way,  refer  to  unissued 
stock.  The  Treasury  Stock — Preferred  account  is  to  be 
handled  as  follows: 


Credit 

From  incoming  cash  sheets, 
with  any  cash  received  for 
the  sale  of  treasury  preferred 
stock. 


Charge 

From  journal  voucher,  with  any- 
preferred  stock  received  in 
payment  of  goods  or  in- 
debtedness. 

From  voucher  record,  with  any 
amount  paid  for  preferred 
stock  as  per  sundry  column 
analysis. 


The  balance  of  this  account  represents  the  value  of  pre- 
ferred treasury  stock  remaining  unsold. 

A— 13.     Treasury  Stock — Common 

As  already  stated,  treasury  stock  is  that  which  has  once 
been  issued  and  then  taken  back  into  the  company's  posses- 
sion, either  as  a  donation,  or  for  cash,  or  for  liquidation  of 
some  debt.  The  account  is  to  be  handled  in  the  same  man- 
ner as  A-12,  "Treasury  Stock — Preferred,"  discussed 
above. 

The  balance  of  this  accotmt  represents  the  value  of  each 
treasury  stock  remaining  unsold. 

A— 14.     Labor 

This  account  represents  the  total  amount  of  any  and  all 
labor  employed  by  the  company  and  must  include  all  wages 
and  salaries.  The  total  of  this  account  is  to  be  obtained  from 
two  different  sources,  as  indicated  below,  and  can  at  any 
time  be  checked  against  the  time  sheets,  thus  affording  a 
method  for  making  a  monthly  audit  of  all  money  paid  out 
for  labor. 


CONTROLLING    ACCOUNTS-ASSETS 


281 


Charge 

From   voucher    record,    sundry 

column,  with  monthly  total  of 

all  labor  paid  for. 
From  petty  cash  disbursements 

sheet,  with  monthly  total  of 

the  labor  column. 


Credit 


From  record  of  production,  bet- 
terment, and  repair  orders, 
with  total  of  column  4  (Form 
78). 

From  factory  overhead  sheet, 
with  total  of  labor  column 
(Form  77). 

From  commercial  expense  dis- 
tribution sheet,  with  totals  of 
columns  1,  2,  3,  17,  and  18 
(Form  91). 


Note:  The  above  method  requires  that  a  voucher  be  drawn 
for  each  pay-roll  made  up,  thus  showing  the  authorization  and 
approval  of  the  same. 

All  salaries  paid  by  check  should  be  handled  in  the  same  way, 
as  full  authorization  for  the  payment  of  labor  can  be  obtained  in 
no  other  way. 

If  a  company  pays  its  employees  two  or  four  times  a 
month,  this  account  must  naturally  balance  out ;  if,  on  the 
other  hand,  it  pays  weekly,  an  "Accounts  Payable  Pay-roll" 
must  be  opened  under  "Liabilities"  in  order  to  show  a  bal- 
ance on  unpaid  labor  at  the  end  of  the  month. 

Assets — B.    Inventory 

As  stated  in  connection  with  stores-keeping,  no  matter 
what  the  nature  of  a  purchase  is,  it  must  first  pass  into 
general  stores  and  be  issued  from  general  stores  to  some 
order  number  by  means  of  a  requisition. 

It  is  only  by  taking  everything  into  general  stores  and 
by  the  use  of  a  production,  betterment,  repair,  or  distribu- 
tion order,  to  transfer  the  item  to  some  other  form  of  in- 
ventory, that  valuations  are  maintained  through  all  the  uses 
to  which  materials,  tools,  etc.,  may  be  put. 


282       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

B— 1.     General  Stores 

General  stores  is  a  controlling  account  for  such  items 
as  go  to  general  stores,  the  balance  of  which  is  obtained 
as  follows: 


Charge 

On  opening  the  account  with 
the  value  of  general  stores,  as 
shown  on  the  general  stores 
record. 

From  voucher  record,  with 
monthly  total  of  "General 
Stores"  column. 

From  production,  betterment, 
and  repair  order  record,  with 
monthly  total  of  items  made 
for  general  stores,  as  per 
sundry  column. 


Credit 

From  production,  betterment, 
and  repair  order  distribution 
sheet,  with  monthly  total  of 
column  2  (Form  78). 

From  commercial  expense  dis- 
tribution sheet,  with  monthly 
total  of  columns  5  and  25 
(Form  91). 

From  factory  overhead  sheet, 
with  monthly  total  of  column 
2  (Form  77). 

From  sales  analysis  sheets,  with 
total    of   general    stores   sold. 


Note:     An  invoice  or  a  sales  slip  must  be  obtained  for  each 
and  every  item  of  material  purchased. 

The  balance  of  this  account  represents  the  inventory 
of  general  stores  and  must  be  made  to  agree  with  any 
physical  inventory  when  it  is  taken,  the  difference,  if  any, 
being  carried  to  the  Profit  and  Loss  account.  The  balance 
of  this  account  can  also  be  reconciled  monthly  with  the 
inventory  values  of  ''Balances  on  Hand"  as  shown  on  the 
stores  record  kept  by  the  stores  recorder. 

B— 2.     Work  in  Progress 

It  is  a  well-recognized  fact  that,  to  obtain  a  thirty  days' 
statement  in  any  business  on  a  perpetual  inventory  basis, 
it  is  absolutely  necessary  to  create  a  controlling  account 
called  "Work  in  Progress"  which  shall  be  the  holding 
account  for  all  work  being  done  of  a  productive  or  asset 


CONTROLLING    ACCOUNTS-ASSETS 


283 


increasing  nature.  This  has  been  described  very  fully  in 
Chapter  IV  under  ''Stores-Keeping"  and  need  not  be  dis- 
cussed in  detail  here  other  than  to  say  that,  to  cover  this 
account  completely  is  one  of  the  principal  functions  of  the 
record  of  production,  betterment,  and  repair  orders  (Form 
78),  On  this  record  are  gathered  all  orders  covering  work 
relative  to  production  and  betterments  for  the  month,  and 
these  orders  are  recapitulated  under  proper  columns  by 
production  orders  horizontally  and  by  totals  vertically. 

The  composition  of  the  Work  in  Progress  account 
should  be  as  follows: 


Charge 

On  opening  the  account,  with 
the  present  value  of  produc- 
tion and  betterment  orders. 

From  production,  betterment, 
and  repair  order  sheet,  with 
total  of  columns  2,  3,  4,  and 
5,  by  items  (Form  78). 


Credit 
From    production,    betterment, 
and  repair  order  sheet,  with 
total   of   columns   8,    9,   and 
10,  by  items. 


Note:  While  the  production,  betterment,  and  repair  order 
sheet  is  used  for  collecting  repair  orders,  so  as  to  classify  them  in 
totals  for  accounting  purposes  in  connection  with  depreciation, 
it  should  be  understood  that  repair  work  does  not  form  a  part  of 
"Work  in  Progress."  These  orders  are  taken  care  of  through 
Depreciation"  and  ultimately  become  a  part  of  the  overhead. 
For  this  reason  they  should  not  be  totalled  into  the  "Work  in 
Progress"  account. 

The  balance  of  this  account  represents  the  inventory 
of  work  in  progress,  and  should  be  shown  in  the  total  of 
column  7  on  the  production,  betterment,  and  repair  order 
sheet.  It  should  be  borne  in  mind  that,  in  handling  this 
sheet,  all  uncompleted  production  and  betterment  orders, 
closed  into  "Unfinished  Work  in  Progress,"  column  7,  are 
transferred  to  column  1  of  the  sheet  for  the  next  month. 


284       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

These  orders  constitute  the  previous  value  of  work  in 
progress,  hence  overhead  expense  must  be  prorated  to 
them,  the  same  as  though  they  were  completed  orders; 
otherwise  a  correct  inventory  could  not  be  obtained  and 
the  overhead  expense  for  the  month  could  not  be  absorbed 
into  inventories  as  it  should  be. 

B— 3.     Component  Stores 

This  account  is  a  controlling  account,  as  described  in 
Chapter  IV,  under  "Stores-Keeping,"  the  debits  and 
credits  for  which  are  as  follows: 


CONTROLLING    ACCOUNTS-ASSETS 


Credit 

From  monthly  production,  bet- 
terment, and  repair  order 
sheet,  with  the  total  disburse- 
ments of  component  stores  to 
production  orders,  as  shown 
imder  column  3. 


Charge 

On  opening  the  account,  with 
the  present  value  of  com- 
ponent stores. 

From  monthly  record  sheet  of 
production  and  betterment  or- 
ders, with  all  completed  com- 
ponent stores  as  credited  to 
monthly  work  in  progress  and 
shown  under  column  8  (Form 
78). 

The  balance  of  this  account  represents  the  book  in- 
ventory of  component  stores. 

B— 4.     Finished  Stores 

This  is  a  controlling  account  of  all  such  stores  as  are 
available  for  merchandising  under  whatever  classification 
they  may  exist,  by  models,  etc.  It  should  be  handled  as 
follows: 


Charge 
On  opening  the  account,  with 
the  inventory  value  of  pres- 
ent finished  stores. 


Credit 

From  sales  analysis  sheet,  with 

total  sales  of  finished  stores. 

From    monthly    distribution    of 


285 


From  production,  betterment, 
and  repair  order  sheet,  with 
all  finished  stores  completed 
as  credited  to  "Work  in 
Progress"  and  chargeable  to 
"Finished  Stores,"  as  shown 
under  column  9    (Form  78). 

From  sales  analysis  sheets,  with 
all  finished  stores  returned  by 
customers  and  placed  in  stock. 


production,  betterment,  and 
repair  orders,  with  any  fin- 
ished stores  used  in  produc- 
tion. (This  seldom  occurs, 
but  when  it  does,  the  finished 
stores  item  must  be  placed  in 
the  same  column  as  com- 
ponent stores  and  the  entry 
made  in  red  ink  to  distinguish 
it  from  component  stores.) 


The  balance  of  this  account  represents  the  book  in- 
ventory of  finished  stores. 

B-5.     Finished  Stores  (Branches) 

There  are  very  few  concerns  which  have  branch  stores 
in  which  they  carry  stock.  However,  where  this  is  done, 
the  amount  of  finished  stores  on  hand  in  branches  is 
obtained  by  crediting  finished  stores  at  the  factory  and 
charging  branches. 

B-6.     Shop  Stores 

This  is  a  holding  account  to  prevent  any  discrepancy 
m  inventory  valuations  when  taking  a  physical  inventory. 
In  other  words,  these  are  supplies  issued  from  general 
stores  and  charged  up  to  expense  but  held  in  sub-stores 
stations  for  the  convenience  of  the  factory.     Unless  a 
holding  account  of  this  kind  is  provided,  on  taking  a 
physical  inventory,  a  considerable  sum  that  had  already 
been  charged  up  to  expense,  might  be  recorded,  whereas 
by  keeping  this  account  for  shop  stores  at  some  fixed  sum, 
subject  to  adjustment  under  Profit  and  Loss,  such  an  error 
will  be  avoided,  and  at  the  same  time  opportunity  will  be 
given  to  find  to  what  extent  these  stores  are  being  used. 
Therefore,  an  adjustment  from  shop  stores  bin  cards  (used 
simply  to  show  "Received,"  "Given  out,''  and  "Balance") 


286      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

should  be  made  on  this  account  at  least  once  every  three 
months. 

The  account  will  be  opened  as  a  stores  account,  and 
debited  with  the  value  as  shown  by  the  quantity  on  the  bin 
cards  of  shop  stores.  This  account  will  be  increased  or 
decreased  by  an  adjustment  in  profit  and  loss  from  time 
to  time. 

The  balance  of  this  account  represents  a  certain 
fixed  investment  in  stores  that  have  been  issued  but  not 
used. 

Assets — C.  Investments 

Attention  is  called  to  the  fact  that  the  following  ac- 
counts have  to  do  with  money  which  is  absolutely  tied  up 
in  the  business,  that  is,  fixed  investments,  the  nature  of 
which  is  such  that  no  "turnover"  can  be  applied  to  them; 
whereas  all  of  the  preceding  accounts  under  A  and  B  deal 
with  assets  which  are  subject  to  contraction  and  expansion 
according  to  trade  conditions.  In  other  words,  all  of  the 
assets  under  A  and  B  are  readily  convertible  and  are  so 
considered  by  banks  and  other  financial  institutions,  while 
those  under  C  are  assets  that  are  of  a  peculiar  value  to  the 
individual  business,  but  are  not  readily  convertible,  and 
are  subject  to  a  heavy  shrinkage  in  case  of  a  forced  sale. 
Therefore,  in  order  to  protect  money  tied  up  in  invest- 
ments, there  has  to  be  established  a  reserve  or  depreciation 
fund  which  by  some  method  of  accounting  must  be  worked 
into  costs  of  production.  To  arrive  at  this,  two  ways  are 
open: 

1.  A  rent  charge  which  shall  become  a  part  of  the 
overhead  expense  and  out  of  which  deprecia- 
tions on  the  buildings  and  real  estate  invest- 
ments are  taken  care  of;  or 


2. 


CONTROLLING    ACCOUNTS-ASSETS  287 

A  method  of  depreciation,  on  a  percentage  basis 
the  amount  of  which  shall  be  charged  directly 
mto  overhead. 


Generally   speaking,    the   second   plan   is   preferable. 
It  IS,  however,  to  be  borne  in  mind,  that  the  original  in- 
vestments m  buildings,  building  equipment,  and  machinery 
should  never  be  lessened  in  the  controlling  accounts,  as 
decreases  are  entirely  taken  care  of  by  depreciation  ac- 
counts.    Real  estate  does  not  come  under  this  rule    as 
appreciation  might  take  place  and  is  then  entered  directly 
on  the  controlling  account,  as  shown  under  the  next  head- 
ing.   Further,  this  method  of  procedure  is  quite  necessary 
m  connection  with  replacement  and  insurance  values     In 
other  words,  the  balance  of  this  account  should  always  be 
equal  to  the  original  inventory  or  purchase  values,  and  be 
protected  by  a  reserve  for  depreciation;  otherwise  invested 
capital  would  be  consumed  by  dividends  not  earned 

Another  point   to   which   very  careful   consideration 
should  be  given,  is  that,  whatever  the  total  expense  of  the 
business  may  be,  it  must  always  come  out  of  the  profits- 
therefore,  the  cost  system,  or  system  of  distribution  must 
provide  for  the  absorption  of  the  expenses  into  its  cost  of 
production.    Hence,  in  connection  with  all  accounts  under 
Investment,"  wasting  of  invested  capital  must  be  pro- 
tected by  reserves  which  must  be  prorated  into  costs  each 
month.     In  other  words,  depreciations  on  original  fixed 
investments  must  be  taken  into  account  before  legitimate 
profits  are  available  in  dividends  to  the  stockholders  of  the 
company. 

C— 1.    Real  Estate 

The  treatment  of  this  account  under  "Investment"  is 
as  follows: 


'I 

ill 


lii.M 


288      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Credit 

In  case  of  any  sale,  the  account 
is  credited  with  the  book  value 
of  the  real  estate  sold,  while 
the  excess  of  selling  price 
over  book  value  is  credited  to 
Profit  and  Loss. 


Charge 

On  opening  the  account,  with 
the  present  book  or  appraised 
value  of  all  real  estate.  If 
appreciations  on  surrounding 
real  estate  have  been  very- 
pronounced  within  a  recent 
period,  the  company's  prop- 
erty should  be  re-appraised 
and  adjusted  accordingly. 
This  is  very  necessary  when 
property  is  to  be  covered  by 
a  mortgage. 

From  check  register,  with  the 
amount  of  any  check  in  pay- 
ment for  real  estate. 

From  journal  voucher,  with  all 
notes  or  mortgages  given  in 
payment  for  real  estate. 


The  balance  of  this  account  is  the  cost  or  appraised 
value,  as  the  case  may  be,  of  real  estate  owned. 

It  is  held  by  many  authorities  that  an  increase  in  land 
value  should  not  be  shown  as  such  on  the  books.  How- 
ever, there  would  seem  to  be  no  good  reason  why  land 
should  not  be  treated  in  the  same  manner  as  any  other 
commodity.  In  all  of  the  other  transactions  of  a  business 
inventory  valuations  fluctuate  according  to  given  condi- 
tions. For  instance,  by  using  the  last  purchase  price  on 
materials,  which  is  the  exact  replacement  value  of 
the  material,  we  change  the  valuations  up  or  down  of 
all  the  materials  on  hand.  The  same  applies  to  the  price 
on  finished  parts;  the  last  regular  production  order  cost 
being  used  for  all  inventory  and  cost  valuations  made,  thus 
increasing  or  decreasing  the  valuation  of  all  such  assets 
on  hand.  These  things  are  all  arrived  at  from  practical 
experience  in  trying  to  operate  a  business  on  a  reasonable 


CONTROLLING    ACCOUNTS— ASSETS 


289 


and  efficient  basis,  conserving  in  all  instances  valuations 
on  assets.  As  stated  before,  changes  in  land  value,  if  based 
on  bona  fide  appraisals,  should  be  treated  in  an  identical 
manner. 

C-2.     Buildings 

In  the  case  of  buildings  it  is  necessary  to  consider  a 
fixed  depreciation;  therefore,  the  treatment  of  the  Builds 
ings  account  would  be  as  follows: 


Charge 

On  opening  the  account,  with 
present  book  value  of  build- 
ings. If  there  is  any  question 
about  their  value,  they  should 
be  appraised  by  a  committee 
or  appraisal  company. 

From  record  of  production  and 
betterment  orders,  with  the 
amount  of  any  betterments  to 
buildings.  (This  does  not  in- 
clude repairs.) 


Credit 
From     incoming     cash     sheet 
(Form  85),  with  any  amount 
received  in  payment  or  build- 
ings sold,  as  per  analysis  of 
sundry  column. 
From  journal  voucher,  with  the 
difference  between  the  selling 
price  and  the  original  cost  of 
any  betterments  to  buildings 
when  these  are  sold,  this  dif- 
ference naturally  representing 
a  loss. 

Note:  Whenever  contract  work  is  done  on  buildings,  cither 
new  or  old,  the  cost  should  be  charged  to  General  Stores  and  then 
be  drawn  out  on  a  betterment  order  and  charged  to  Buildings 
account. 

The  balance  of  this  account  shows  the  original  cost 
of  buildings  together  with  any  subsequent  increase  in 
value  from  betterments.  The  current  estimated  value  is 
the  difference  between  the  balance  of  this  account  and  the 
balance  of  E-2,  ^'Reserve  for  Buildings." 

C— 3.    Building  Equipment 

This  account  should  consist  of  such  items  as  are  in 
reality  a  part  of  the  buildings,  and  are  not  used  directly 


I  II 


290       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

for  manufacturing  or  processing  purposes,  such  as  eleva- 
tors, plumbing,  steam  fittings,  electric  light  and  power 
wiring,  gas  fittings,  sprinkler  system,  etc.  These  are  dis- 
tinguished from  the  building  proper,  largely  because  they 
are  subject  to  a  much  more  rapid  depreciation  than  is  the 
building  itself;  for  instance,  it  might  not  be  necessary  to 
write  off  more  than  2%  on  the  buildings,  while  on  the 
items  above  mentioned,  5%  to  10%  per  annum  might  be 
required. 

The  handling  of  Building  Equipment  account  is  as 
follows : 


Credit 

From  incoming  cash  sheets, 
with  any  amount  received  in 
payment  for  building  equip- 
ment sold. 

From  journal  voucher,  v^^ith  the 
difference  between  selling 
price  when  sold  and  the  origi- 
nal cost. 


Charge 

On  opening  the  account,  with 
the  present  book  values  of  this 
equipment.  If  this  value  is 
not  available,  an  appraisal 
should  be  made. 

From  monthly  betterment  order 
record,  with  all  completed 
plant  betterments  chargeable 
to  building  equipment.  This 
must  include  all  contract 
work  which  should  be  passed 
through  stores  and  requisi- 
tioned out  as  betterment  ma- 
terial, so  that  all  betterments 
to  building  equipment  will 
make  themselves  manifest  on 
the  monthly  betterment  order 
record. 


The  balance  of  this*  account  shows  the  original  cost  of 
building  equipment,  together  with  any  subsequent  in- 
crease from  betterments;  the  current  value  being  the  dif- 
ference between  the  balance  of  this  account  and  the  bal- 
ance of  E-3,  "Reserve  fon  Building  Equipment." 


CONTROLLING    ACCOUNTS-ASSETS 

291 

C-4.    Office  Furniture  and  Equipment 

.oul^llnrT  '°'"'  '""''"'■^  °'  ^"  '^■"<^^'  ^"d  office 
uZsoiVr  T  '^P^""'^--^'  adding  machines,  etc.  As 
Items  of  this  nature  must  pass  into  general  stores  when 
purchased,  no  distribution  of  any  kinf  will  be  charged    o 

tem'nrL  T'k  ^'^  ™"^''"  ^^^°^^'-  *herefore'thes: 
taTnst     1        I  "  "-^q^'^itioned  out  and  distributed 

against  some  betterment  order  number.     The  account 
must  be  handled  as  follows:  account 


Charge 

On  opening  the  account,  with 
the  present  book  value  of  of- 
fice furniture  and  equipment. 
If  this  is  not  available,  they 
must  be  inventoried. 

From  monthly  betterment  order 
record,  with  all  completed 
plant  betterments  chargeable 
to  office  furniture  and  equip- 
ment. 


Credit 

From  incoming  cash  sheets,  with 
all  cash  received  in  payment 
for  office  furniture  and  equip- 
ment sold,  as  per  analysis  of 
sundry  column. 
From  journal  voucher,  with  the 
difference  between  the  selling 
price  and  the  original  cost  of 
any  office  furniture  and  equip- 
ment    plus    any    betterments 
when  sold. 

The  balance  of  this  account  shows  the  original  cost  of 
office  furn,ture  and  equipment  together  with  any  subst 
quen   mcrease  in  value  for  betterments.    The  current  e^t 

for  Offi  ^fthis  account  and  the  balance  of  E-4,  "Reserve 
tor  Office  Furniture  and  Equipment." 

C-5.    Machinery  and  Tools 

This  account  represents  the  value  of  all  the  machinery 
and  shop  equipment  in  the  plant,  except  the  power  and 

are  parts  of,  a  machine,  but  does  not  include  dies    lies 
fixtures,  and  gages,  or  any  items  that  go  into  miscelllne: 


|!. 


'Ill 


292 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


ous  equipment,  as  these  are  provided  for  in  separate  ac- 
counts. All  items  covered  by  this  account  must  be 
purchased  and  passed  into  general  stores  and  then  drawn 
into  the  factory  by  a  proper  betterment  order;  therefore, 
no  direct  charges  from  the  voucher  record  are  permissible. 
This  account  will  be  handled  as  follows: 


Charge 

On  opening  the  account,  with 
the  present  book  value  of  ma- 
chinery and  tools.  If  not 
available,  then  appraisal  must 
be  made. 

From  monthly  betterment  order 
record,  with  all  completed 
plant  betterments  chargeable 
to  machinery. 


Credit 

From  incoming  cash  sheets, 
with  any  amount  received  in 
payment  for  machinery  sold 
as  per  analysis  of  sundry 
column. 

From  journal  voucher,  with  the 
difference  between  selling 
price  and  the  original  cost  of 
any  machinery  or  tools  plus 
any  betterments  added  thereto 
when  sold. 


r- 


The  balance  of  this  account  is  the  original  cost  of 
machinery  and  tools  together  with  subsequent  increase  in 
value  from  betterments.  The  current  estimated  value  at 
any  time  is  the  difference  between  the  balance  of  this 
account  and  the  balance  of  E-5,  "Reserve  for  Machinery 
and  Tools." 


Special  Account— Power  and  Light  Equipment 

While  no  special  account  is  showm  on  the  chart  or  bal- 
ance sheet,  it  is  quite  necessary  sometimes  to  separate  the 
investments  in  a  power  and  Hght  plant  from  the  invest- 
ment in  the  rest  of  the  plant,  inasmuch  as  it  is  a  special 
service  feature  which  may  be  utilized  by  more  than  one 
plant.  In  other  words,  it  is  a  producing  factor  which,  if 
properly  handled,  would  have  costs  computed  on  an  inde- 
pendent basis  and  its  product  sold  to  the  parent  plant,  and 


CONTROLLING    ACCOUNTS-ASSETS 

to  others  if  it  furnished  service  to  them.  Therefore,  it  may 
be  desirable  to  have  an  account  controlling  the  investment 
in  all  such  items  of  power  and  light  equipment,  as  engines, 
boilers,  pumps,  tanks,  generators,  air  compressors,  etc. 

Like  all  other  things,  items  of  this  nature  must  be  pur- 
chased and  put  in  general  stores  and  not  be  distributed 
from  any  voucher  record.  It  is  suggested  that  this  ac- 
count always  be  handled  in  total  and  in  the  following 
manner; 


Charge 

On  opening  the  account,  with 
the  present  book  value  of 
power  and  light  equipment. 
If  not  available,  an  appraisal 
must  be  made. 

From  monthly  betterment  order 
record,  with  all  completed  bet- 
terments chargeable  to  power 
and  light  equipment. 


Credit 

From  incoming  cash  sheets, 
with  any  amount  received  in 
payment  for  power  and  light 
equipment  sold. 

From  journal  voucher,  with  the 
difference  between  the  selling 
price  and  the  original  cost  of 
power  and  light  equipment 
plus  any  betterments  when 
sold. 


The  balance  of  this  account  shows  the  original  cost  of 
power  and  light  equipment  together  with  any  increase  in 
value  from  betterments.  The  current  estimated  value  at 
any  time  will  be  the  difference  between  the  balance  of  this 
account  and  the  balance  of  ''Reserve  for  Power  and  Light 
Equipment." 

C— 6.     Dies,  Jigs  and  Fixtures 

Particular  consideration  should  be  given  to  this  ac- 
count, as  it  often  represents  values  of  a  temporary  nature. 
In  other  words,  it  represents  an  investment  in  many  tools, 
which  should  not  be  written  off  to  expense  immediately 
upon  their  purchase,  or  completion,  but  which  must  be 
retired  by  what  is  known  as  a  rapid  depreciation  fund 


I'l 


m 


294      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

amounting  to  anywhere  from  20%  to  100%  per  annum. 
This  sort  of  equipment  must  be  sharply  distinguished  from 
small  tools,  such  as  drills,  reamers,  and  cutting  tools  (ex- 
cepting perhaps  large  milling  cutters),  which  are  bought 
and  put  into  general  stores  and  are  immediately  written 
into  expense  as  soon  as  issued  to  the  factory. 
This  account  should  be  handled  as  follows: 


CONTROLLING    ACCOUNTS-ASSETS 


295 


Charge 

On  opening  the  account,  with 
present  book  value  of  all  dies, 
jigs,  and  fixtures  in  use. 

From  monthly  betterment  order 
record,  with  all  completed  bet- 
terments, in  the  form  of  jigs, 
fixtures,  etc. 


Credit 

From  journal  voucher,  with  the 
initial  cost  of  these  items 
when  they  become  absolutely 
worthless  or  are  discarded. 

From  incoming  cash  sheets, 
with  any  sales  made  of  the 
same. 


Note:  This  investment  account  will  always  be  increased  from 
B-2,  "Work  in  Progress";  therefore,  it  calls  for  a  betterment  order 
or  some  special  form  of  betterment  requisition. 

The  balance  of  this  account  should  show  the  original 
cost  of  these  items  together  with  any  subsequent  increase 
in  value  from  betterments.  The  current  value  at  any  time 
is  the  difference  between  the  balance  of  this  account  and 
the  balance  of  account  E-6,  "Reserve  for  Dies,  Jigs,  and 
Fixtures." 

C— 7.     Shop  Fixtures  and  Fittings 

This  account  will  represent  the  value  of  all  shop  fix- 
tures and  fittings,  such  as  benches,  cupboards,  chairs, 
desks,  together  with  all  containing  racks  for  stores-keep- 
ing, for  tool  cribs,  etc.  All  items  of  this  nature  which  are 
bought  for  the  factory  must  first  pass  through  general 
stores,  being  issued  to  the  factory  by  betterment  orders. 
The  account  will  be  handled  as  follows: 


Charge 
On  opening  the  account,  with 

the  present  book  value  of  shop 

fixtures  and  fittings. 
From  monthly  betterment  order 

record,  with  all  monthly  plant 

betterment  orders  chargeable 

to  these  items. 


Credit 


From    incoming    cash    sheets, 
with  any  amount  received  in 
payment  for  shop  fixtures  and 
fittings    as    per    analysis    of 
sundry  column. 
From  journal  voucher,  with  the 
difiference  between  the  selling 
price  and  the  original  cost  of 
any  shop  fixtures  and  fittings 
plus    any    betterments    when 
sold. 

From  journal  voucher,  with  the 
initial  cost  of  any  item  when 
it  becomes  obsolete. 

The  balance  of  this  account  shows  original  cost  of  shop 
fixtures  and  fittings  together  with  any  subsequent  increase 
in  value  from  betterments.  The  current  estimated  value 
at  any  time  is  the  difference  between  the  balance  of  this 
account  and  the  balance  of  E-7,  ^'Reserve  for  Shop  Fix- 
tures  and  Fittings.*' 

C— 8.    Miscellaneous  Equipment 

This  is  an  investment  account  of  a  peculiar  nature  and 
one  not  subject  to  depreciation;  therefore,  no  reserves 
are  set  up  for  it.    It  takes  so  much  water  to  fill  a  siphon 
before  it  will  operate  and  deliver  water  at  the  discharge 
end.    With  a  given  output  and  a  given  number  of  people 
employed,  it  takes  just  so  much  miscellaneous  equipment 
to  operate  a  plant.    This  miscellaneous  equipment  consists 
of  such  things  as  hammers,  wrenches,  twist  drills,  reamers, 
dies,   taps,   etc.,   and   also   brooms,   pails,   buckets,    small 
trucks,  tote  boxes,  etc.    Assets  of  this  nature  are  always  re- 
covered by  the  taking  of  a  physical  inventory;  therefore, 
a  holding  account  of  this  inventory  must  be  maintained  in 
order  to  preserve  an  equilibrium  on  inventory  valuations 


£•   I  J 


lis 


296       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

at  the  termination  of  the  fiscal  year.  This  account  repre- 
sents a  standing  inventory  and  is  not  affected  during  the 
year  by  any  increase  or  decrease  of  items. 


Charge 

On  opening  the  account,  with 
the  present  book  value  of 
miscellaneous  equipment. 

From  journal  voucher,  with  any 
increase  in  this  equipment  as 
shown  by  physical  inventory 
from  year  to  year. 


Credit 

From  incoming  cash  received 
sheets,  with  any  amount  re- 
ceived in  payment  for  miscel- 
laneous equipment  as  per 
analysis  of  sundry  column. 

From  journal  voucher,  with  any 
decrease  in  the  amount  of  this 
equipment  at  subsequent  in- 
ventory periods. 

The  balance  of  this  account  gives  the  cost  of  miscel- 
laneous equipment  as  affected  by  any  increases  or  de- 
creases shown  by  subsequent  inventories  or  sales. 

C-9.     Patterns 

This  account  represents  the  value  of  patterns  on  hand 
at  any  time  and  should  be  handled  conservatively,  for  it  is 
a  well-known  fact  that  changes  made  in  patterns  are  so 
rapid  in  most  instances  as  to  cause  them  to  become  worth- 
less. These  items  must  be  handled  through  a  controlling 
account,  and  written  off  on  a  fixed  basis  rather  than  to 
charge  them  up  to  expense  at  the  time  they  are  created. 
In  other  words,  these  items  are  distributed  over  some  time 
period  or  on  some  fixed  basis  for  the  purpose  of  stabilizing 
costs.    The  account  will  be  handled  as  follows: 


Charge 

On   opening  the  account,   with 

the    present    book    value    of 

patterns. 
From  monthly  betterment  order 

record,    with    all    completed 

betterments  for  same. 


Credit 

From  journal  voucher,  with  ini- 
tial cost  of  discarded  patterns. 

From  incoming  cash  sheets, 
with  any  amount  received  in 
payment  for  patterns  as  per 
analysis  of  sundry  column. 


CONTROLLING    ACCOUNTS-ASSETS 

297 

The  balance  of  this  account  shows  total  initial  cost  of 
patterns,  the  current  estimated  value  at  any  time  being 
the  difference  between  the  balance  of  this  account  and  the 
balance  of  E-8,  "Reserve  for  Patterns." 

C— 10.     Drawings 

This  account  represents  the  value  of  drawings  on  hand 
at  any  time.    All  that  was  stated  above  in  regard  to  pat- 
terns applies  with  equal  or  greater  force  to  drawings 
and  the  account  is  handled  in  the  same  way  as  Patterns 
account. 

The  balance  of  this  account  shows  total  initial  cost  of 
drawings,  the  current  estimated  value  at  any  time  being 
the  diflference  between  the  balance  of  this  account  and  the 
balance  of  E-9,  "Reserve  for  Drawings." 

C-11.    Patents 

There  is  perhaps  no  account  on  the  general  books  of 
any  company  that  is  more  questionable  than  that  of 
patents.  Their  true  worth  is  an  absolutely  unknown 
quantity,  and  tremendously  fictitious  values  are  often 
placed  upon  them  to  the  ultimate  detriment  of  the  com- 
pany s  affairs.    This  account  is  handled  as  follows- 


Charge 

From  voucher  record,  with 
actual  cost  to  obtain  patent  as 
per  sundry  column  which 
should  include  all  legal  ex- 
penses as  well  as  patent  fees. 

From  journal  voucher,  with  the 
actual  cost  or  estimated  value 
of  a  patent  which  is  pur- 
chased. 


Credit 

From  journal  voucher,  with  the 
original  book  value  of  any 
patent  which  has  expired  or 
has  been  abandoned. 

From  incoming  cash  sheet,  with 
any  amount  received  in  pay- 
ment for  patents  which  are 
sold  instead  of  being  aban- 
doned, as  per  sundry  column. 


nf  J?'  ^^^u"^  ""^  ^^''  ^""^""^  '^^^'  ^^^  t^tal  initial  cost 
01  patents,  the  current  estimated  value  at  any  time  being 


;i| 


H 


298       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

the  difference  between  the  balance  of  this  account  and  the 
balance  of  E-10,  "Reserve  for  Patents." 

C-12.     Advanced  Expenses — Development  and  Experi- 
mental Work 

In  many  lines  of  business  a  controlling  account  is 
necessary  to  cover  what  may  be  termed  ''Advanced  Ex- 
penses" for  development  and  experimental  work.  This 
account,  when  required,  is  purely  an  arbitrary  one,  dictated 
by  conservatism  for  the  purpose  of  stabilizing  costs.  In 
other  words,  the  cost  of  development  and  experimental 
work  for  a  product  is  held  in  this  controlling  account  and 
spread  over  the  life,  or  a  portion  of  the  life,  of  the  product. 
This  account  oftentimes  includes  research  work,  especially 
of  a  laboratory  nature. 

By  having  an  account  of  this  character,  it  is  possible 
to  prorate  monthly  a  certain  amount  for  this  kind  of  work, 
thereby  putting  it  on  the  same  basis  as  unexpired  insur- 
ance, advertising,  etc. 

The  account  is  handled  as  follows: 


Charge 

On  opening  the  account,  with 
any  undistributed  expense  of 
this  character. 

From  monthly  betterment  order 
record  or  a  prorating  sheet, 
with  all  expense  chargeable  to 
this  kind  of  work. 


Credit 

From  journal  voucher,  with  the 
proper  monthly  distribution 
which  should  be  charged 
directly  into  overhead  or 
commercial  expense  as  shown 
on  the  monthly  prorating 
sheets. 


The  balance  of  this  account  is  the  amount  to  be  pro- 
rated to  subsequent  time  periods.  The  time  period  and 
the  amount  absorbed  into  expense  for  each  period  may  be 
changed  from  time  to  time  as  necessary,  but  only  by  au- 
thority of  the  board  of  directors  or  executive  committee. 


f  : 


CHAPTER    XV 

CONTROLLING   ACCOUNTS 

LIABILITY   AND 

PROFIT   AND    LOSS    ACCOUNTS 

Continuing  the  illustration  and  explanation 
of  the  chart  of  controlling  accounts,  and 
giving  in  detail  the  source  from  which  the 
debits  and  credits  of  each  liability  account 
and  each  profit  and  loss  account  are  obtained. 


«  i 


CHAPTER    XV 


CONTROLLING   ACCOUNTS 

LIABILITY   AND 

PROFIT   AND    LOSS   ACCOUNTS 

Liabilities — D.  Current 

D-l.    Accounts  Payable 

This  is  the  controlling  account  of  the  purchase  ledger 
or  purchase  vouchers.  In  other  words,  it  represents  the 
total  amount  of  money  which  the  company  owes  its 
creditors.  Postings  are  made  to  this  account  at  the  end 
of  each  month  as  follows: 


Charge 

From  check  record,  with  month- 
ly total  of  the  "Accounts 
Payable"  column. 

From  journal  voucher,  with  any 
other  items  charged  to  pur- 
chase creditors,  such  as  notes 
issued  in  payment,  etc. 


Credit 

From  voucher  record,  with 
monthly  total  of  all  purchases, 
as  per  "Accounts  Payable" 
column. 

From  journal  voucher,  with  any 
other  items  credited  to  pur- 
chase creditors. 

From  incoming  cash  sheet,  with 
all  cash  received  from  pur- 
chase creditors,  as  per  analy- 
sis of  sundry  column. 

The  balance  of  this  account  is  the  amount  due  pur- 
chase creditors.  The  aggregate  balance  of  the  purchase 
vouchers  must  agree  with  this  balance  which  should  be 
proven  once  a  month  by  drawing  off  the  balance  from  the 
unpaid  vouchers. 

301 


302 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


..■J  I 


I'l 


D-2.    Accounts  Payable  Datings 

This  is  a  very  unusual  account  with  most  concerns  and 
for  this  reason  is  not  given  on  the  chart  (Form  92).  It 
represents  purchases  under  special  agreements,  where  the 
invoice  does  not  mature  in  thirty  or  sixty  days  as  custom- 
ary, but  at  a  later  date  specifically  indicated  in  the  pur- 
chase contract. 

D-3.    Notes  Payable 

This  account  s'hows  the  company's  liability  for  notes 
payable,  and  should  be  handled  as  follows: 


Charge 

From  check  record,  with  all 
payments  on  account  of  notes 
payable,  as  per  "Notes  Pay- 
able" column. 

From  journal  voucher,  with  any 
adjustments  chargeable  to 
notes  payable  by  other  than 
cash,  as  per  monthly  total  of 
the  "Notes  Payable"  column. 


Credit 

From  incoming  cash  sheets, 
with  monthly  total  of  the 
"Notes  Payable"  column,  rep- 
resenting all  notes  payable 
issued,  discounted,  and  re- 
newed. 

From  journal  voucher,  with  all 
renewals  of  notes  by  other 
than  cash  transactions,  as  per 
the  monthly  total  of  "Notes 
Payable"  column. 


Note:  Upon  the  renewal  of  a  note,  a  journal  voucher  must  be 
made  on  which  will  be  recorded  the  cancellation  of  the  unpaid  note 
or  any  portion  thereof  by  the  issue  of  a  new  note  in  its  place.  The 
amount  of  the  old  and  new  note  will  be  charged  and  credited  to  this 
account,  respectively.  In  the  event  of  the  new  note  being  in  excess 
of  the  old  one,  the  excess,  representing  interest  or  a  further  pay- 
ment to  a  purchase  creditor,  must  be  charged  and  credited  to  the 
proper  account 

The  balance  of  this  account  represents  the  amount  of 
the  company's  liabilities  for  notes  payable,  and  must  agree 
with  the  total  of  unpaid  notes  still  outstanding.  It  should 
be  proven  at  least  once  a  month  against  the  unpaid  notes. 


CONTROLLING    ACCOUNTS-LIABILITIES  303 

D-4.    Taxes  Accrued 

In  the  handling  of  this  account,  it  must  be  remembered 
that  taxes  are  usually  paid  at  the  end  of  the  year.  As  it 
is  not  desirable  to  have  all  of  this  expense  charged  to  the 
month  in  which  it  is  paid,  it  should  be  prorated  monthly. 
The  account  may  be  handled  as  follows: 


Charge 
From  voucher  record,  with  the 
amount  of  tax  bills  when  re- 
ceived as  £er  sundry  column. 


Credit 
On  opening  the  account,  with 
accrued  taxes  to  date,  if  any. 
From  journal  voucher,  with 
monthly  taxes  as  per  tax 
schedule  on  monthly  prorating 
sheet--i/i2  each  month. 

Note:  By  handling  the  account  in  this  way,  it  is  not  necessary 
to  credit  any  reserve  for  taxes,  as  the  account  itself  is  practically 
a  reserve.  ^ 

The  credit  balance  of  this  account  represents  the  com- 
pany's liability  for  taxes  accrued  but  not  due. 

D-5.    Interest  Accrued— General 

This  account  shows  the  liability  for  interest  accrued 
on  notes,  etc.,  and  should  be  handled  as  follows: 


Charge 
From   check   record,   with   the 
amount  of  cash  paid  for  in- 
terest which  has  accrued,  as 
per  sundry  column. 


Credit 
From  journal  voucher,  with  the 
monthly  proportion  of  interest 
accrued  on  notes  payable,  as 
per  interest  schedule  on  the 
monthly  prorating  sheet. 

Note :  No  interest  which  is  paid  in  advance  should  go  into  this 
account,  but  it  should  be  charged  to  "Advanced  Expense—General " 
and  through  that  account  prorated  into  monthly  expense. 

The  balance  of  this  account  represents  the  company's 
liability  for  interest  accrued  on  notes  payable. 


304      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

D-^.    Interest  Accrued  on  Bonds 

This  account  and  the  next  account,  D-7,  "Interest 
Accrued  on  Mortgages,"  are  handled  in  the  same  manner 
as  D-5,  "Interest  Accrued — General." 

Liabilities — E.  Reserves 

Theoretically  and  practically,  reserves  are  established 
to  separate  from  surplus  a  certain  amount  with  which  to 
cover  losses  such  as  expenditures  for  repairs,  depreciations, 
and  the  renewal  of  various  kinds  of  equipment.  This  is  done 
as  a  conservative  measure,  as  otherwise  the  available  surplus 
would  appear  larger  than  it  really  is,  and  create  a  tendency 
to  declare  dividends  not  warranted,  especially  during  dull 
times. 

Monthly  charges  should  be  made  against  each  reserve, 
and  credited  to  overhead,  so  that  no  one  particular  time 
period  will  be  unduly  burdened  for  such  expenditures.  These 
expenditures  can  then  be  handled  in  whole  or  distributed 
over  the  different  departments,  so  as  to  become  a  part  of 
the  departmental  overheads. 

It  must  be  remembered  that  these  reserves  are  legit- 
imately withheld  from  profits,  because  the  amounts  they 
protect  have  been  prorated  over  the  product  manufactured 
and  thus  charged  into  costs  of  production.  In  other  words, 
the  cost  of  goods  has  been  increased  by  the  amount  charged 
to  depreciation,  for  replacements,  repairs,  etc.  Any  com- 
mercial profit  derived  from  sales,  over  and  above  this  cost, 
is  therefore  true  profit  and  not,  as  would  otherwise  be  the 
case,  a  portion  of  the  stockholder's  investment  which,  hidden 
in  profits,  might  be  returned  to  him  in  the  form  of 
dividends. 

As  the  name  of  each  reserve  account  relating  to 
tangible  assets  indicates  its  purpose  and  also  the  sources 
of  debit  and  credit  for  the  same,  it  will  not  be  necessary  to 


CONTROLLING    ACCOUNTS-LIABILITIES  30- 

describe  every  account.     The  following  will  serve  to  illus- 
trate them  all  : 

£-2,     Reserve  for  Depreciation  of  Buildings 

This  account   is  typical  of  all  reserve  accounts  for 
tangible  assets,  and  is  handled  as  follows: 


Credit 
From  journal  voucher,  with 
monthly  amounts  of  estimated 
depreciation  on  buildings, 
chargeable  to  overhead  or 
commercial  expense. 


Charge 

From    journal     voucher,    with 

monthly    amount    of    repairs 

expended  on  buildings. 
From  journal  voucher,  with  the 

difference,  if  a  loss,  between 

the  initial  cost  and  the  selling 

price  of  buildings  sold. 

^    The  credit  balance  of  this  account  is  the  unused  por- 
tion  of  the  reserve. 

In  connection  with  the  above,  it  may  be  said,  that  the 
titles  of  E-1,  Real  Estate;  E-2,  Buildings;  E-3,  Building 
Equipment;  E-4,  Office  Furniture  and  Equipment-  E-5 
Machinery  and  Tools;  E-6,  Dies,  Jigs  and  Fixtures!  E-/ 
Shop  Fixtures  and  Fittings;  E-^,  Patterns;  and  E-P,' 
Drawings,  are  in  each  case  clearly  descriptive  of  the  char- 
acter of  the  accounts. 

E-10.     Reserve  for  Depreciation  of  Patents 

Patents  are  not  a  tangible  asset;  therefore,  this  ac- 
count must  be  treated  differently  from  the  foregoing.  It 
shows  the  amount  of  depreciation  set  aside  for  patents, 
based  on  the  life  a  patent  has  to  run. 


Charge 
From  journal  voucher,  with  the 
difference,  if  a  loss,  between 
the  initial  cost  and  the  selling 
price  of  any  patent  sold. 


Credit 
From  journal  voucher,  with  the 
monthly  prorated  amount  of 
depreciation  for  patents, 
chargeable  to  overhead  or 
commercial  expense. 


3o6 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Note :  In  connection  with  this  account,  it  should  be  borne  in 
mind  that  the  full  life  of  a  patent  is  seventeen  years,  and  that, 
whatever  the  valuation  of  a  patent  is,  it  must  be  depreciated  at  least 
pro  rata  according  to  the  time  it  has  to  run,  so  that  at  the  end  of 
its  life  the  book  valuation  will  be  wiped  out. 

The  credit  balance  of  this  account  is  the  unused  por- 
tion of  the  reserve. 

E— 11.     Reserve  for  Bad  Accounts 

This  account  is  handled  as  follows: 


CONTROLLING    ACCOUNTS-LIABILITIES 


Charge 

From  journal  voucher,  with  all 
accounts  which  are  deter- 
mined to  be  uncollectible. 


Credit 

From  journal  voucher,  each 
month  with  one-twelfth  of  the 
estimated  annual  loss  from 
uncollectible  accounts. 

From  incoming  cash  sheet,  with 
any  moneys  collected  on  items 
shown  on  the  debit  side  of 
this  account. 


The  balance  of  this  account  shows  the  difference  between 
the  amounts  set  aside  monthly  to  cover  losses  from  bad 
debts  and  the  actual  losses  sustained.  At  the  end  of  the 
year  the  balance  should  be  closed  into  profit  and  loss. 

If  anv  collections  are  made  on  accounts  which  had  been 
written  ofif  in  a  preceding  year,  such  collections  should  not 
be  credited  to  this  reserve  account  but  to  profit  and  loss. 

E— 12.     Bond  Redemption  Fund 

This  account  is  credited  monthly  or  quarterly,  at  the 
discretion  of  the  board  of  directors,  with  an  amount  sufifi 
cient  to  provide  for  the  redemption  of  the  bonds  at  thei  • 
maturity. 

E— 13.     Obsolete  Stock 

This  account  should  be  handled  as  follows: 


Charge 
From  journal  voucher,  with  the 
inventory  value  of  stock  writ- 
ten off  to  obsolescence. 


307 

Credit 
From  journal  voucher,  with  the 
estimated  monthly  amount  re- 
quired to  cover  the  writing  off 
of  losses  due  to  obsolescence 
of  stock. 

E-14.    Obsolete  Equipment 

obso";';:  z:t  ''  '^"''^^ '-  ^^^^^^'^  ^^^  --  ~ « 

LiABiLiT,Es-F.  Capital.  Bonds,  and  Mortgages 
Capital  Stock  Accounts 

Authorized      or  some  similar  title,  in  order  to  brins  on 

nanv    1;    v""""'  ^'^  ''''''  capitalization  of  the  com- 
pany.    Speaking  generally,  however,  any  account  renre 
senting  capital  stock  should  show  only  the  stock  tha    1  as" 
actually  been  issued;  that  is  to  say,  if  the  authorized  capita 
stock  of  a  company  is  $500,000  divided  into  $100  000  ore- 
ferred  and  $400,000  common,  and  if  all  of  the  pS  d 
but  only  $300,000  of  the  common,  is  issued,  thT    pi  ',' 
tock  accounts  should  show  the  issue  of  $400,000  ai  d  no 
the  entire  capitalization  of  $500,000.    In  other  word,     he 

ot  the  authorized  capital  stock  as  has  been  issued    -,nH 
IS  actually  outstanding.  .  "^'''  ^"'^ 

Furthermore,  when  stock  has  been  issued  and  paid  for 
by  a  subscriber  and  is  either  donated  to,  or  bought  back 
by.  the  company,  such  stock  becomes  tr  asurv  to  k  "5 
does  not  m  anv  way  affect  the  capital  stock  acco  mts  I^^J 


3o8      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

or  F-2,  but  must  be  carried  in  a  separate  account  as 
treasury  stock  as  an  asset  (A-12  and  A-13). 

When  stock  has  been  issued  but  has  not  been  paid  for 
in  full;  it  should  be  treated  in  the  same  manner  as  any 
other  account  sale,  that  is,  it  should  be  credited  to  Capital 
Stock  and  be  charged  to  Accounts  Receivable  in  the  per- 
sonal accounts  ledger. 

F-1.     Capital  Stock— Preferred 

This  account  should  be  handled  as  follows: 


Credit 
From    stock    record   book,   the 
total   preferred   stock   which 
has  been  issued. 


Charge 
From  journal  voucher,  with  any 
reduction  in  preferred  stock, 
or  any  preferred  stock  for- 
feited for  non-payment  of 
purchase  price. 

The  balance  of  this  account  represents  the  company's 
outstanding  preferred  stock. 

F-2.    Capital  Stock— Common 

This  account  would  be  handled  in  the  same  manner 
as  F-1,  and  the  balance  represents  the  company's  liability 
for  outstanding  common  stock. 

F-3.    Bonds 

Bonds  will  be  carried  in  a  holding  account  the  same  as 
F-1  and  F-2,  until  redeemed  by  the  company,  when  the 
account  will  be  charged  and  cash  credited.  The  balance  of 
this  account  always  shows  the  amount  of  outstandmg 
bonds  for  which  the  company  is  liable. 

F-4.     Mortgages 

Mortgages  will  be  held  in  account  F-4  until  retired,  at 


CONTROLLING    ACCOUNTS-LIABILITIES  309 

which  time  this  account  should  be  charged  from  the 
voucher  record  and  cash  credited.  The  balance  of  this 
account  always  shows  the  amount  of  outstanding  mort- 
gages for  which  the  company  is  liable. 

F— 13.     Surplus 

This  account  is  a  reservoir  for  holding  all  moneys  made 
over  and  above  actual  costs  of  doing  business,  and  also  for 
holdmg  certain  amounts  to  cover  contingencies,  improve- 
ments, etc.,  not  taken  care  of  by  reserve  accounts. 


Charge 
From    journal    voucher,    with 

amount  of  dividends  declared 

by  board  of  directors. 
From  journal  voucher,  with  the 

disposition     of     any     other 

amounts  of  surplus. 


Credit 
From  journal  voucher,  with  the 
balance  of  Profit  and  Loss — 
General  to  be  carried  to  this 
account. 


Note :  Under  no  circumstances  can  any  entry  be  made  to  this 
account  except  by  authorization  of  the  board  of  directors. 

The  balance  of  this  account  is  the  undivided  profits 
subject  to  the  board  of  directors'  disposal. 

F-.14.     Dividends  Declared 

This  account  is  a  record  of  the  dividends  declared  and 
paid,  which  should  always  be  taken  from  surplus  and  not 
directly  from  profit  and  loss. 


Charge 

From  check  record,  with  all 
dividends  paid  in  cash,  as  per 
sundry  column. 

From  journal  voucher,  all  divi- 
dends paid  in  some  other  way 
than  by  cash. 


Credit 
From  journal  voucher,  with  the 
amount  of  dividends  declared 
by  the  board  of  directors,  as 
shown  by  the  minute  book, 
charging  the  same  to  surplus. 


^lO 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


The  balance  of  this  account  consists  of  dividends  de- 
clared but  not  yet  paid.  As  a  general  rule,  dividends 
should  never  be  declared  unless  means  are  available  to  pay 
them;  therefore,  there  should  never  be  a  balance  to  this 
account  save  for  the  interval  between  the  declaration  and 
payment  of  dividends. 

Profit  and  Loss — G.  Revenues 

G.    Total  Revenues 

If  a  controlling  account  of  all  sales  is  desired,  this  ac- 
count will  be  set  up  and  represents  the  revenues  from  all 
sales,  as  shown  by  the  sales  analysis  sheet  and  by  the  chart 
covering  the  various  models  made,  and  by  any  other  record 
showing  items  sold.  The  account  will  be  handled  as 
follows: 


Credit 

From  sales  analysis  sheet,  with 
monthly  totals  of  all  sales. 


Charge 

From  returned  goods  analysis 
sheet,  with  monthly  totals  at 
sales  prices,  of  all  sales  re- 
turned. 

From  sales  analysis  sheet,  with 
the  monthly  totals  of  the 
various  adjustments  named 
thereon. 


The  account  is  balanced  out  each  month  into  Monthly 
Profit  and  Loss  (K-1). 

G— 1.     Road  Racer  Model 

If  it  were  thought  better  to  have  a  running  controlling 
account  for  each  item  in  the  classification  of  the  sales 
analysis  sheet,  or  the  chart,  any  account  from  G-1  to  G-14 
inclusive  would  be  handled  according  to  the  following 
method : 


CONTROLLING  ACCOUNTS-PROFIT   AND   LOSS    311 


Credit 
From  sales  analysis  sheet,  with 
monthly  total  of  all  sales  of 
road  racer  model. 


Charge 

From  returned  goods  analysis 
sheet,  with  monthly  total  of 
all  sales  returned  at  sales 
prices  for  road  racer  model. 

From  sales  analysis  sheet,  with 
monthly  totals  of  the  adjust- 
ments named  thereon  for  road 
racer  model. 

The  account  is  balanced  out  each  month  into  the 
Monthly  Profit  and  Loss  account. 

Profit  and  Loss — H.  Costs 
H.    Cost  of  Sales 

This  is  the  analysis  of  costs  for  the  sales  items,  and 
consequently,  whatever  method  is  used,  the  classifica- 
tion under  "H"  must  be  exactly  the  same  as  illustrated 
under  "G." 

If  the  costs  of  sales  are  handled  in  one  master  account, 
the  debits  and  credits  will  be  as  follows: 


Charge 
From  the  cost  columns  of  the 
sales     analysis     sheet,     with 
monthly    cost    totals    of    all 
goods  sold. 


Credit 

From  the  cost  columns  of  the 

returned  goods  sales  analysis 

sheet,  with  monthly  cost  totals 

of  all  goods  sold  and  returned. 


The  balance  of  this  account  represents  the  cost  of 
goods  sold,  and  is  closed  out  each  month  to  the  debit  of 
Monthly  Profit  and  Loss  (K-1). 

If  each  item  in  the  classification  were  treated  sepa- 
rately, any  account  from  H-1  to  H-14  would  be  handled 
the  same  as  above.* 


♦1,.  1  connection  with  the  "G"  and  "H"  accounts,  reference  is  arain  made  to 
the  sales  analysis  ^eet  which  gives  the  ckssification  shown  on  tLSknTfcom 
trolUng  accounts.  This  sales  analysis  sheet  is  used,  not  only  for  the  r^S  ^f  ^)Z 
Joi^^^'V^l  *^'^''  l"^  *^^  ^I""^  *«t  °f  «b«t«  i«  "'«d  for  recordinHll  retuSe" 
lofngout.''^   ""''  ^^  '^^^^'^^'^   °"  '^'^'  '^'""'^  i^t  «  they  IrcTn  llL  wh^ 


i 


312 


UNIFIED     ACCOUNTING    FOR    INDUSTRIALS 


Profit  and  Loss — ^J.  Expenses 


J— 1.    Commercial  or  Office  Expense 

This  account  will  include  all  expenses  chargeable  to  the 
commercial  end  of  the  business,  such  as  commercial  labor, 
commercial  material,  and  commercial  general  expense,  as 
outlined  in  Chapter  XIII,  "Commercial  or  Office  Account- 
ing."   This  account,  in  total,  is  handled  as  follows: 


Charge 

From  voucher  record,  with  the 
total  amount  of  commercial 
expense  as  shown  by  the 
"Commercial  Expense"  col- 
umn. 

From  journal  voucher,  with  any- 
commercial  expense  prorated 
over  the  business  not  shown 
on  voucher  record. 


Credit 

From  monthly  distribution  sheet, 
with  monthly  total  of  com- 
mercial expense  as  shown  on 
the  same,  this  being  the  grand 
total  of  the  subsidiary  ledger 
commercial  accounts  which 
are  chargeable  to  Profit  and 
Loss. 


This  account  is  balanced  out  into  Monthly  Profit  and 
Loss. 

J— 2.     Overhead 

The  one  great  object  of  this  account  is  to  stabilize  fac- 
tory costs,  by  the  equitable  distribution  of  overheads  on  an 
hourly  rate  basis  or  on  a  percentage  basis.  It  is  highly 
undesirable  to  change  these  rates  more  often  than  is  abso- 
lutely necessary,  as  the  change  of  an  overhead  rate  in  a 
business  means  a  change  in  the  inventory  valuation  of  all 
"Work  in  Progress,"  ''Component  Stores,"  and  ''Finished 
Stores."  For  instance,  if  the  actual  overheads  for  any 
particular  month  as  shown  on  the  overhead  distribution 
sheet  were  $100,000,  and  if  the  amount  on  a  percentage  or 
other  basis,  actually  absorbed  into  production,  as  shown 
on  the  production  sheets,  were  $97,000,  there  would  be 


CONTROLLING  ACCOUNTS-PROFIT  AND  LOSS    313 

$3,000  to  be  disposed  of  in  either  one  of  two  ways-  first 
It  can  be  taken  from  this  account  and  wiped  out  through 
Profit  and  Loss,  or  second,  a  holding  account  can  be 
created  under  B,  ^'Assets-Inventory,"  in  order  to  allow 
time  for  showing  whether  or  not  the  percentage  basis  or 
the  hourly  rate  basis  should  be  changed.  In  this  way  the 
amount  spent  for  overhead  would  be  undistributed  ex- 
pense that  remained  as  an  asset,  the  same  as  "Advanced 
iixpenses— Insurance,"  "Salesmen,"  etc. 

This  account  will  embrace  all  non-productive  labor 
non-productive  material,  and  manufacturing  general  ex- 
pense, and  will  control  the  subsidiary  ledger  factory  over- 
head accounts.  Its  purpose  is  to  wipe  out  any  difference 
through  Profit  and  Loss  that  may  exist  between  the  over- 
head actually  applied  during  the  month  and  that  actually 
created  by  expenditures.    The  account  should  be  handled  as 


Credit 

From  production  and  betterment 
order  record,  with  the  total 
amount  of  factory  overhead 
prorated  to  production  and 
betterment  orders  during  the 
month. 


Charge 

From  voucher  record,  with  the 
total  monthly  amount  as 
shown  by  "Overhead"  column. 

From  journal  voucher,  with  all 
other  charges  or  distributions 
of  overhead  expenditure  not 
included  in  the  voucher  rec- 
ord.    These  charges  will  be 
the  same  as  shown  on  the  sub- 
sidiary   ledger    overhead   ac- 
counts,   and  will   agree   with 
the     total     general     expense 
shown    on   monthly   distribu- 
tion sheet. 

The  balance  of  this  account  is  any  unused  or  excess  over- 
head which  .s  necessarily  carried,  together  with  commercial 
expense,  mto  Monthly  Profit  and  Loss. 


314 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


K — Profit  and  Loss 


K— 1.     Monthly  Profit  and  Loss 

This  account  will  represent  the  monthly  profit  or  loss 
in  the  business,  and  will  be  closed  out  monthly  into  Profit 
and  Loss — General.    It  should  be  handled  as  follows: 


Credit 
From    journal     voucher,     with 
revenue  of  sales,  charging  the 
same  to  Revenues. 


Charge 

From  journal  voucher,  with  cost 
of  sales,  crediting  the  same  to 
cost  accounts. 

From  journal  voucher,  with  ex- 
penses, both  commercial  and 
unused  or  excess  overhead. 


The  balance  of  this  account  is  the  net  monthly  profit 
or  loss,  and  will  be  carried  into  Profit  and  Loss — General. 

K— 2.     Profit  and  Loss — General 

This  account  is  provided  for  the  accumulation  of  the 
entries  of  monthly  profit  and  loss.  The  account  should 
be  handled  as  follows: 


Charge 

From  journal  voucher,  with  the 
monthly  balance  of  Profit  and 
Loss,  if  a  loss. 


Credit 

From  journal  voucher,  with  the 
monthly  balance  of  Profit  and 
Loss,  if  a  profit. 


CONTROLLING  ACCOUNTS-PROFIT   AND   LOSS    315 

No  transfer  from  the  accumulated  Profit  and  Loss- 
General  to  ''Surplus,"  should  be  made  unless  by  the  au- 
thorization of  the  board  of  directors  or  executive  commit- 
tee; nor  should  any  authorization  to  transfer  amounts 
from  "Surplus"  to  ''Dividends"  he  given  except  by  the 
board  of  directors  or  executive  committee. 

It  must  also  be  borne  in  mind  that  reserves  for  depre- 
ciations, etc.,  are  really  undivided  profits,  and  therefore, 
the  percentages  employed  for  the  various  assets  must  also 
be  authorized  by  the  board  of  directors  or  executive  com- 
mittee  and  duly  recorded. 


The  balance  of  this  account  is  carried  to  surplus  quar- 
terly, semiannually,  or  annually,  according  to  the  discre- 
tion of  the  board  of  directors. 


This  is  as  far  as  the  comptroller  or  general  accountant 
should  handle  the  accounts  shown  on  the  chart  of  con- 
trolling accounts. 


CHAPTER    XVI 

TAKING   THE    INVENTORY 

Showing  the  development  of  a  dupHcate  ta^ 

method,  together  with  complete  specifications 

tor  actually  taking  an  inventory. 


CHAPTER    XVI 


TAKING    THE    INVENTORY 

Preliminary  Steps 

To  take  an  inventory  for  valuations  only  is  one  thing, 
but  to  take  an  inventory  for  the  purpose  of  perpetuating  it 
by  count  as  well  as  by  valuations,  at  the  same  time  establish- 
ing a  definite  control  of  investments  and  production,  is  an 
entirely  different  proposition,  and  one  that  requires  definite 
plans  carefully  worked  out  in  advance.     These  plans  must 
embrace  not  only  the  methods  to  be  employed  in  the  actual 
taking  of  the  inventory,  but  also  a  temporary  organization 
for  doing  the  work,  a  complete  classification  for  production 
and  accounting  purposes,  and  a  previously  prepared  pricing 
system  as  well.    Further,  the  plant  itself  should  be  physically 
prepared  for  the  taking  of  an  inventory  by  issuing  explicit 
instructions,  sufficiently  in  advance  of  the  inventory  period, 
to  the  superintendent  and  foremen  to  clean  up  the  various 
departments  and  finish  as  far  as  possible  all  production  and 
betterment  orders  standing  as  work  in  progress. 

Too  often  inventory  taking  is  considered  as  a  sort  of 
necessary  evil  to  be  disposed  of  along  the  lines  of  least 
resistance,  usually  by  turning  this  work  over  to  foremen 
and  clerks  with  little  or  no  instruction  or  preparation  from 
cither  an  accounting  or  oroduction  point  of  view. 

When  inventories  are  taken  in  this  way,  the  work  of 
counting,  sorting,  and  classifying  is  usually  done  in  such  a 
careless  manner  as  to  make  the  results  inaccurate  and  mis- 
leading, thus  necessitating  many  subsequent  adjustments. 

319 


41 


\\ 


1 


i 


i 


320      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

It  is  Strange  why  to  so  many  people  a  dollar  in  cash  appears 
so  differently  from  a  dollar  represented  by  material  for 
which  cash  has  been  paid.  It  is  even  more  strange  that 
very  often  executives  in  the  taking  of  an  inventory  will 
not  consider  the  fact  that  their  material  and  property  values 
are  just  as  important,  just  as  real,  just  as  necessary  to  the 
profit  and  loss  statement  as  is  cash  in  bank  or  accounts 
receivable,  and  it  is  difficult  to  understand  the  laxity  with 
which  such  property  values  are  frequently  handled  as  com- 
pared with  the  careful  methods  used  for  the  protection  of 
actual  cash  in  the  drawer  and  of  cash  values  in  the  shape  of 

book  accounts. 

The  first  work  in  connection  with  inventory  taking  is 
to  taper  off  on  production  orders  during  the  two  or  three 
weeks  previous  to  the  inventory  date,  and  delay  the  starting 
of  new  orders  as  much  as  practicable  so  there  will  be  as 
little  material  and  as  little  work  in  progress  in  the  factory 
as  is  consistent  with  reasonable  factory  practice  and  sales 
conditions.  The  works  or  chief  engineer  should  also  be 
conservative  in  putting  new  betterment  orders  into  the 
factory  just  previous  to  an  inventory  period. 

More  important  perhaps  than  this  is  the  work  of  getting 
all  condemned  components  out  of  work  in  process,  and  all 
obsolete  equipment  out  of  the  factory.  This  should  cover 
not  only  materials  and  components  manufactured,  but  also 
gages,  fixtures,  all  kinds  of  tools,  and  in  addition,  all 
machinery,  belting,  etc.,  together  with  the  thousand  and  one 
small  items  usually  found  under  benches,  in  cupboards,  etc., 
that  will  never  be  used  again,  but  for  disposing  of  which  no 
one  ever  seems  willing  to  take  the  responsibility.  These 
things  should  all  be  gotten  together  and  gone  over  by  the 
engineers  and  management  jointly,  if  necessary,  in  order  to 
arrive  at  a  decision  for  their  disposition  and  thus  make 
possible  the  cleaning  up  of  the  factory. 


,-i:;-v,:^-.;;'r:rr.:r:aas:«': 


TAKING    THE    INVENTORY 


321 


Formal  Announcement 

It  is  best  to  make  a  formal  announcement  of  the  taking 
of  inventory,  stating  when,  by  whom,  and  how  it  is  to  be 
taken.    The  following  form  is  given  as  an  example: 

Inventory  Specifications 
November  1,  1916 

1.  The  Rogers  Motor  Works  will  be  closed  from  Fri- 
day night,  December  29,  1916  until  Tuesday  morning, 
January  2,  1917,  for  the  purpose  of  taking  inventory. 

2.  The  following  Inventory  Committee  has  been  ap- 
pointed: 

William  Blake,  Engineering  Department 
James  F.  Porter,  Production  Department 
Eben  Williams,  Superintendent 
John  D.  Ropes,  Works  Engineer 
Harvey  Adams,  Chief  Inspector 
Enoch  Delmer,  Accounting  Department 
Wallace  James,  Purchasing  Department 

Allen  Turner,  Chairman 

3.  The  inventory  of  the  Rogers  Motor  Works  will  be 
taken  as  of  December  31,  1916  by  the  duplicate  tag  system; 
i.e.,  each  and  every  lot  and  kind  of  material  will  be  taken 
by  a  count  under  instructions  given  hereafter,  and  as  soon 
as  counted,  weighed,  or  otherwise  classified,  the  data  and 
information  concerning  each  particular  lot,  piece,  or  kind  of 
material,  zvill  be  written  with  indelible  pencil  upon  an  in- 
ventory tag  in  duplicate.  The  tag  will  be  wired  or  other- 
wise attached  to  the  material  so  counted,  weighed,  or  other- 
wise classified,  and  the  duplicate  will  be  sent  to  the  head- 
quarters of  the  Inventory  Committee  as  soon  as  the  taking 
of  any  particular  lot  of  material  or  section  is  completed. 


\$ ' 


II 


322      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

4.  Each  superintendent,  foreman,  and  assistant  foreman 
will  have  charge  of  that  section  of  the  plant  or  office  which 
comes  under  his  daily  supervision.  Each  of  these  will  be 
fully  assisted  by  the  Inventory  Committee  in  organizing  for 
the  taking  of  inventory.  It  is  desired  that  as  many  groups 
of  men  as  can  be  used  be  put  on  this  work. 

5.  The  importance  of  a  correct  inventory  of  the  Rogers 
Motor  Works  cannot  be  overestimated,  and  these  instruc- 
tions are  given  out  at  this  time  in  order  that  every  superin- 
tendent, foreman,  and  department  head  may  have  ample 
time  to  study  out  and  prepare  for  his  particular  duties. 

6.  All  machines  and  fixed  equipment  throughout  the 
plant,  including  furniture  and  fittings,  etc.,  will  be  numbered 
individually  by  a  brass  tag  or  by  having  numbers  painted 
upon  them,  so  that  all  equipment  of  this  character,  including 
engines,  boilers,  dynamos,  motors,  pumps,  transmission 
machinery,  etc.,  can  be  inventoried  without  shutting  down 

the  plant. 

7.  Tags  must  not  in  any  instance  he  destroyed.  All 
tags  that  are  given  out  will  he  charged  hy  their  numbers 
to  the  parties  receiving  them  so  that  any  tag  number  that 
becomes  lost  or  misplaced  may  be  located.  If  a  tag  is  spoiled 
mark  it  ''void''  and  then  turn  it  in. 

8.  As  soon  as  any  superintendent,  foreman,  sub-foreman, 
or  assistant,  has  gone  over  all  of  the  space  allotted  to  him 
and  made  sure  that  every  item  has  been  covered  by  a  tag, 
he  will  immediately  report  to  the  Inventory  Committee  so 
that  other  inventory  work  may  be  assigned  if  necessary. 

9.  No  tags  may  be  pulled  at  any  point  in  the  plant  until 
the  signal  for  release  has  gone  out  to  the  factory  from  the 
Inventory  Committee.  As  soon  as  tags  are  pulled  it  con- 
stitutes a  release  of  the  items  covered,  and  preparation  may 
be  at  once  made  to  return  such  items  to  regular  operation. 
Upon  the  pulling  of  tags,  they  are  to  be  at  once  sent  to  the 


TAKING    THE    INVENTORY 


323 


Inventory  Committee  in  the  main  office  where  they  will 
immediately  be  matched  up  by  numbers  with  the  duplicate 
to  see  that  no  numbers  have  been  lost  or  destroyed. 

10.  All  equipment,  tools,  or  material,  of  any  kind  in- 
voiced to  the  company  prior  to  January  1,  1917  and  not 
received  until  after  this  date,  must  be  included  in  the  inven- 
tory, and  all  such  invoices  must  be  plainly  stamped  "season 
of  1916  included  in  inventory." 

11.  All  equipment,  tools,  or  material  invoiced  prior  to 
January  1,  1917  but  not  unloaded  until  after  January  1, 
1917,  must  be  inventoried  from  the  invoice  and  every  pre- 
caution must  be  taken  to  keep  such  goods  entirely  separate 
from  other  inventoried  items  until  after  the  inventory  tags 
have  been  checked  up. 

12.  Items  received  prior  to  January  1,  1917  but  not 
bearing  an  invoice  date  until  on  or  after  January  1,  must 
not  be  included  in  the  inventory. 

13.  Superintendents,  foremen,  and  assistant  foremen  are 
hereby  instructed  to  clean  up  on  the  work  in  their  depart- 
ments in  every  way  possible  prior  to  the  taking  of  the  inven- 
tory and  to  have  ready  Saturday  morning,  December  30, 
1916,  all  materials,  works,  etc.,  sorted  by  kinds  and 
arranged,  piled  or  stacked  ready  for  counting  or  weighing. 

14.  The  chief  inspector  is  hereby  instructed  to  have 
the  inspection  work  cleaned  up  by  Saturday  morning,  De- 
cember 30,  1916,  working  a  special  inspection  force  all  night 
on  Friday,  the  29th  of  December,  if  necessary,  to  accomplish 
this.  All  finished  components  must  be  in  component  stores 
for  the  taking  of  inventory. 

15.  The  production  department  is  hereby  instructed  to 
issue  from  general  stores  the  minimum  amount  of  material 
possible  on  Thursday,  December  28,  and  Friday,  December 


29 


16.     The  production  engineer  is  hereby  instructed  U 


■ 


324      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

transfer  on  the  28th  and  29th  of  December,  all  surplus  tools, 
fixtures,  etc.,  from  crib  or  shop  stores  to  general  tool  stores, 
so  that  work  in  taking  inventory  and  classifying  it  may  be 
minimized  in  every  possible  way ;  also  to  transfer  from  crib 
or  shop  stores  to  general  stores  before  December  29,  1916 
any  and  all  supplies  that  are  a  surplus,  and  to  have  all  crib 
cards  show  ''Balance  on  Hand"  in  each  crib  and  have 
maximum  and  minimum  amounts  established. 

17.  All  superintendents,  engineers,  foremen,  assistant 
foremen,  and  factory  clerks  must  give  their  undivided  time 
and  attention  to  the  taking  of  this  inventory  as  between 
Saturday  morning,  December  30,  1916,  and  Tuesday  morn- 
ing, January  2,  1917.  Special  instructions  for  organization, 
and  a  chart  covering  same,  will  be  issued  by  the  Inventory 
Committee  as  a  guide  in  taking  the  inventory. 

18.  The  foremen  and  assistant  foremen  of  each  depart- 
ment will  supervise  the  weighing,  counting,  and  recording 
of  all  items  inventoried  in  their  department,  and  will  be  held 
strictly  accountable  for  correct  numbering,  naming,  location, 
etc.  In  preparation  for  inventory,  they  must  collect  all  small 
tools,  cutters,  fixtures,  etc.,  and  get  them  into  the  tool  cribs 
or  on  benches  properly  arranged  by  "kinds"  for  counting. 

19.  Each  department  will  be  provided  with  an  engineer 
or  engineers  to  assist  foremen  and  assistant  foremen  in  giv- 
ing a  complete  description  of  each  part  and  the  next  opera- 
tion to  be  done  and  any  change  in  sequence.  This  is  of  the 
utmost  importance  in  connection  with  production  after 
January  1,  1911,  as  upon  the  correctness  of  the  inventory, 
showing  the  number  of  pieces  done  up  to  any  given  opera- 
tion, schedules  for  the  work  throughout  the  factory  must 

be  adjusted. 

20.  The  inspection  department,  the  production  depart- 
ment, and  the  salvage  department,  are  hereby  instructed 
to  work  as  closely  together  during  the  entire  month  of  De- 


TAKING    THE    INVENTORY 


325 


cember  as  possible  in  order  to  sift  out  from  "Work  in 
Progress"  each  and  every  component  that  is  completely 
condemned  and  beyond  repair. 

21.  The  inspection  department  is  hereby  instructed  to 
take  a  complete  inventory  in  detail  of  all  components  that 
are  imperfect  but  subject  to  repairs,  separating  each  com- 
ponent in  a  class  by  itself  and  showing  on  each  component 
the  operation  next  to  be  done.  In  others  words,  all  rejected 
work  that  is  subject  to  repairs  must  be  totaled  into  a  separate 
inventory  figure.  The  responsibility  for  this  will  rest 
entirely  upon  the  inspection  department. 

22.  Should  any  foreman  find  in  his  department  any 
materials,  tools,  or  fixtures,  etc.,  the  value  of  which  is  ques- 
tionable, he,  in  conjunction  with  the  engineer  appointed  to 
his  division,  is  hereby  authorized  to  give  an  estimated  value. 
This  must  be  written  on  the  tag  in  indelible  pencil  at 
the  time  the  estimate  is  made,  together  with  the  word 
''Estimate"  to  precede  the  amount. 

2Z.  Special  instructions  are  hereby  given  and  authoriza- 
tion made  to  place  all  obsolete  components  and  scrap  in  the 
salvage  department  on  or  before  inventory,  and  it  is 
reiterated  here  that  the  inspection  department  is  instructed 
to  see  that  all  obsolete  stock  and  condemned  components  are 
put  in  the  salvage  department  as  rapidly  as  possible  during 
the  entire  month  of  December.  If,  however,  any  condemned 
items  are  found  that  have  not  been  disposed  of,  full  par- 
ticulars as  to  the  condition  of  such  items  must  be  specially 
written  on  the  tag  and  marked  "Special"  so  as  to  call 
attention  to  it. 

24.  The  general  stores  keeper  and  the  tool  stores  keeper 
are  hereby  instructed  to  make  a  complete  classification  of  all 
materials  and  tools  on  hand  which  for  any  reasons  have 
become  obsolete  in  order  that  the  purchasing  department 
may  dispose  of  them. 


326       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

25.  On  the  night  of  December  29,  1916,  the  superin- 
tendent of  assembly  must  return  to  component  stores  all 
finished  components  that  have  not  been  assembled. 

26.  After  the  inventory  of  any  section  allotted  to  a 
superintendent  or  his  foreman  has  been  completed,  the 
superintendent  or  foreman  must  sign  a  statement  to  the 
effect  that  the  inventory  has  been  completed  to  the  best  of 
his  knowledge  and  belief,  and  immediately  send  it  to  the 
Inventory  Committee.  This  statement  is  necessary  so 
that  a  record  may  be  on  file  for  insurance  and  accounting 
purposes. 

27 .  If  stock  cannot  be  weighed  or  counted,  a  careful 
estimate  must  be  made  by  the  superintendent  of  the  depart- 
ment in  which  the  estimate  is  required  and  the  tag  marked 
''Estimate"  and  signed  by  him  as  an  approval  of  it. 

2^.  The  following  assignments  have  been  made:  (De- 
tailed assignments  to  each  floor  of  each  building  should 
follow. ) 

Organizing  the  Force 

Each  building  should  be  designated  by  a  letter  and  each 
floor  by  a  number.  Then,  opposite  the  building  letters, 
plus  the  number,  should  be  written  the  name  of  the  man 
who  is  to  be  in  charge  of  that  particular  section  for  the 
taking  of  the  inventory,  followed  by  the  names  of  all  special 
assistants  that  may  be  required,  together  with  the  number 
of  regular  employees  that  will  be  necessary  to  count,  weigh, 
and  handle  the  materials  to  be  inventoried — all  of  which  is 
merely  preparatory  work  on  the  part  of  the  engineers, 
superintendents,  and  processing  department  heads.  It  is 
also  highly  desirable  that  foremen  or  department  heads 
should  be  made  responsible  for  this  work  in  their  respec- 
tive departments — supplemented,  where  necessary,  by  en- 
gineers and  draftsmen  to  act  as  assistants. 


TAKING    THE     INVENTORY 
Classification  of  Assets 

The  next  thing  of  importance  is  the  classification  of 
assets  which  the  inventory  will  include,  which  must  be  the 
same  classification  used  on  the  balance  sheet  under  "Assets  " 
details  of  which  can  be  found  in  Chapter  XIV,  "Controlling 
Accounts,"  as  follows: 

A.  General  Stores 

B.  Work  in  Progress-— Production  Orders 

C.  Work  in  Progress— Betterment  Orders 

D.  Work   in   Progress— Components   Rejected   for 

Repairs 

E.  Component  Stores 

F.  Finished  Stores 

G.  Shop  Stores 

H.  Miscellaneous   Equipment    (See  controlling  ac- 
count C-8;  show  per  cent  used.) 

I.  Real  Estate  (by  plots) 

J.  Buildings 

K.  Building  Equipment 

L.  Office  Furniture  and  Equipment 

M.  Machinery  and  Tools 

N.  Dies,  Jigs,  Fixtures,  and  Gages 

O.  Power  Plant 

P.  Shop  Fixtures  and  Fittings 

Q.  Patterns 

R.  Drawings 

S.  Railroad 

T.  Railroad  Equipment 

Each  and  every  item  in  the  factory  which  constitutes  a 
fixed  or  permanent  asset  as  shown  by  the  balance  sheet 
S' '    'fi?''  ''''^^'  ''Investments,"  consisting  of  items  from 
1    to    T    inclusive,  must  have  for  its  identification  wher- 
ever possible,  a  number  attached  to  it,  this  number  serving 


ki     ;") 


i 


J.* 


;i  t- 


328       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

two  purposes — one  for  identification  in  case  of  transfer  from 
one  geographical  point  to  another,  and  one  as  identification 
for  valuations  from  year  to  year.  By  this  method,  means 
are  provided  for  obtaining  a  proof  of  loss  in  case  of  fire,  and 
for  establishing  and  maintaining  a  perpetual  inventory  on 
permanent  investment  assets.  Once  the  assets  of  the  plant 
have  been  inventoried  and  numbered  in  this  manner,  it  will 
never  be  necessary  to  retake  the  inventory  physically,  the 
entire  scheme  being  protected  by  betterment  orders  as  they 
are  completed  from  time  to  time  and  added  to  these  items, 
each  item  being  numbered  at  the  time  it  is  completed  and 
put  to  use  in  the  plant  and  the  fact  being  shown  by  a  proper 
record. 

Therefore,  as  this  classification — which  is  the  general 
classification  of  controlling  accounts — represents  the  in- 
ventory values  on  the  balance  sheet,  the  entire  inventory 
must  be  taken  and  classified  accordingly,  and  the  letter 
symbolizing  the  classification  to  which  the  item  inven- 
toried belongs, .  must  be  shown  on  the  inventory  tags 
illustrated  in  Form  93. 

In  connection  with  the  material  kept  in  general  stores, 
a  supplementary  classification  can  be  used.  For  instance,  if 
general  stores  is  represented  by  "A,"  after  this  could  be 
written  either  the  name  of  the  items  according  to  the 
classified  index  of  general  stores,  shown  in  Qiapter  IV,  or  a 
Dewey  decimal  number  may  be  used,  as  in  Form  95.  In  the 
latter  case,  "A"  would  mean  general  stores,  7  could  mean 
*'steel,"  and  .1  "high  speed  steel."  In  other  words,  A-7.1 
would  indicate  a  high  speed  steel  in  general  stores.  Any 
one  of  several  arrangements  of  this  kind  can  be  cieated  to 
meet  particular  requirements. 

In  the  classification  tmder  "Work  in  Progress"  a  split 
is  made;  i.e.,  it  is  divided  into  "Work  in  Progress — Pro- 
duction    Orders";     "Work     in     Progress — Betterment 


TAKING    THE    INVENTORY 


329 


Orders";  and  "Work  in  Progress— Components  Rejected 
for  Repairs."  It  is  better  at  an  inventory  period  to  divide 
"Work  in  Progress"  into  this  classification  rather  than  to 
take  it  as  one  account,  for  the  reason  that  it  gives  oppor- 
tunity for  a  check-up  on  production  and  production  sched- 
ules and  also  on  the  tools  required  for  same.  Hence,  this 
classification  can  be  used  by  the  production  and  tools  de- 
partments for  inventory  purposes. 

Pricing  the  Inventory 

In  order  to  make  sure  that  valuations  are  as  nearly 
correct  as  possible,  the  following  departments  should  be 
called  upon  to  assist  the  inventory  committee  in  the  matter 
of  pricing. 

The  pricing  of  all  raw  materials,  general  supplies,  etc., 
bought  outside  and  located  in  general  stores,  should  be 
obtained  from  the  purchasing  department  in  conjunction 
with  the  general  stores  records. 

The  pricing  of  tools,  fixtures,  cutters,  and  gages,  made 
in  the  factory,  should  be  obtained  from  the  accounting 
department;  except  where  estimating  is  required,  in  which 
case  the  valuation  is  obtained  from  the  engineering  depart- 
ment. 

The  pricing  of  all  machine  tools,  transmission  ma- 
chinery, transportation  equipment,  etc.,  covered  by  identi- 
fication or  inventory  numbers,  should  be  obtained  from 
the  accounting  department  and  the  works  engineer. 

The  inventory  committee  should  be  given  access  to 
the  different  departments,  and  the  latter  should  be  author- 
ized and  instructed  to  assist  the  inventory  committee  in 
every  way  possible  in  obtaining  a  correct  pricing  of  all 
inventoried  items. 

The  price  to  be  used  on  all  raw  materials  should  be  the 
last  purchase  price  from  any  regular  source  of  supply, 


F» 


:f  i  \ 


330 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


irrespective  of  what  may  have  been  paid  for  the  actual 
material  on  hand. 

The  price  of  all  work  in  progress  should  be  the  labor 
cost  plus  the  material  cost,  plus  regular  overhead. 

The  price  of  all  components  and  finished  stores  should 
be  the  cost  price  of  the  last  regular  production  order  for 
same. 

The  price  of  all  equipment  should  be  the  betterment  or 
purchase  order  price  and  must  include  any  regular  equip- 
ment, freight,  and  installation  expense. 

No  depreciations  should  be  applied  in  placing  valua- 
tions upon  fixed  assets.  Assets  are  valued  as  they  stand, 
i.e.,  at  the  original  purchase  price. 

Inventory  Tag 

The  design  of  the  inventory  tag  is  such  that  when  the 
stub  is  removed  at  the  perforated  Hne  it  leaves  a  standard 
4x6  card,  in  duplicate,  thus  permitting  the  inventory  tags 
to  be  filed  in  a  regular  4x6  filing  cabinet.  If  this  is  handled 
properly  it  will  greatly  facilitate  pricing  and  extension 
work,  and  will  leave  the  inventory  in  a  perfectly  classified 
condition  on  the  original  tags.  By  using  a  tag  of  this 
character  all  t'le  help  available  can  be  used  to  advantage 
as  it  gives  opportunity  to  create  a  much  bigger  organiza- 
tion for  the  taking  of  inventory  than  is  usually  employed. 

The  tag  has  two  prime  divisions  (Form  93),  arranged 
in  such  a  manner  that  either  one  or  the  other  side  of  the 
tag  can  be  used  for  any  and  all  kinds  of  items  to  be  in- 
ventoried. Under  the  heading  "Processed  Work  to  Be 
Entered  Here"  must  be  written  up  all  work  in  progress 
an'di  all  component  stores,  while  the  labor  cost,  material 
cost  and  overhead  cost  are  entered  on  the  lines  provided 
for  this  purpose. 

On  the  other  side  of  the  tag,  under  the  heading  "Write 


TAKING    THE    INVENTORY 


331 


All  General  Stores  and  Equipment  Here,"  are  provided 
captions  to  take  care  of  any  and  all  items  in  the  plant, 
their  description  and  serial  number,  and  also  whether  the 
Item  is  -In"  or  "Out  of  Use."  In  taking  supplies,  ma- 
terials, etc.,  the  "Unit  of  Measure"  must  be  shown  without 
exception  as  well  as  the  price  per  unit  of  measure. 

These  tags  are  all  numbered  and  attached  to  the  partic- 
ular  items  covered.  When  the  tag  is  pulled,  the  stub  with 
the  number  on  it  will  be  left  on  the  item  inventoried; 
therefore,  it  is  very  essential  that  the  location  be  carefully 
defined  as  provided  for  on  the  tag,  so  that  any  item  re- 
garding which  a  dispute  arises,  may  be  readily  located.  Each 
tag  must  show  by  the  word  "Classification"  the  exact  alpha- 
betical division  to  which  the  item  inventoried  belongs. 

As  soon  as  the  inventory  is  completed  and  all  tags  are 
pulled,  they  will  immediately  be  sorted  according  to  this 
classification,  and  divided  among  several  groups  of  pricers, 
each  group  possessing  the  necessary  data  or  experience  to 
do  this  work  correctly. 

Disposition  of  Tags 

As  soon  as  the  inventory  has  been  classified  and  in- 
dexed, one  set  of  priced  cards  should  be  arranged  in  a 
filing  cabinet  in  4  x  6  drawers  and  kept  as  a  permanent 
record  for  the  accounting  department  to  use  either  as 
reference  matter  regarding  valuations  or  as  reference 
matter  in  case  of  fire,  as  by  this  inventorv  proof  of  loss 
can  always  be  obtained  in  so  far  as  all  fixed  investments, 
etc.,  are  concerned. 

The  duplicate  set  of  tags  should  be  divided  up.  All 
those  relating  to  production  should  be  sent  to  the  pro- 
duction department,  to  check  up  their  production  records. 
Those  for  betterment  orders  should  be  sent  to  the  chief 
engineer  or  works  engineer,  and  those  for  stores  to  the 


ItPI 


332       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Stores  recorder.  After  being  checked,  the  duplicate  sets  can 
be  destroyed,  but  the  original  set  of  tags  should  be  kept  in  a 
vault  for  safety. 

Equipment  Record 

It  is  necessary  either  for  the  works  manager  or  the 
accounting  department  to  have  a  complete  record  of  all 
the  equipment  in  the  plant.  Form  94  has  been  provided, 
to  show  any  item  of  equipment  covered  by  an  inven- 
tory number.  It  is  a  5  x  8  card  printed  on  both  sides ;  the 
front  being  for  data  relative  to  a  description  of  the  item 
together  with  the  various  numbers  belonging  to  it,  its 
location,  and  also  the  date  of  installation,  etc.,  where  new 
equipment  is  provided.  Several  lines  are  given  for  this 
information,  so  that  entries  may  be  made  on  the  same  card 
whenever  equipment  is  changed  geographically  from  one 
location  to  another,  thus  providing  a  running  record  for 
such  transfers.  The  back  of  the  card  is  reserved  for  values. 
For  purchases  outside,  the  data  come  under  "Purchase 
Cost"  section;  when  manufactured,  under  the  "Manufac- 
tured Cost"  section;  between  these  two  sections  columns 
are  provided  to  register  any  additional  values  together 
with  their  date  and  order  number. 

On  the  right  of  the  card,  space  is  arranged  for  keeping 
a  record  of  the  repairs  showing  the  date  repairs  were  made, 
and  the  amount. 

With  this  record  completed,  classified,  and  indexed,  a 
perpetual  inventory  may  be  checked  off  and  made  up. 

As  a  general  thing,  this  record  would  be  practically 
the  only  one  that  is  required  for  any  ordinary  plant. 
Should,  however,  a  different  captioning  be  needed  to  cover 
any  particular  item  or  items,  it  can  easily  be  arranged 
provided  that  the  method  of  keeping  running  costs,  ad- 
ditional values,  and  repair  costs  remains  the  same.    This 


i 


TAKING    THE    INVENTORY 


333 


IS  important  for  the  reason  that  under  certain  classes  of 
machinery  an  annual  depreciation  is  written  oflf  on  a  per- 
centage basis.  The  repair  costs  shown  on  these  records 
either  as  against  an  individual  machine  or  against  a  group 
of  machines,  will  indicate  whether  the  percentage  used  to 
cover  depreciations  and  repairs  is  too  large  or  too  small,  by 
simply  taking  the  total  amount  of  repair  costs  for  any 
penod  of  time  and  checking  it  against  the  amount  that 
IS  set  aside  as  a  reserve  for  depreciation. 


f 


CHAPTER    XVII 

THE   WORK   OF   THE   SYSTEMATIZER 

Showing  the  difference  between  systematiz- 
ing and  accounting,  and  outlining  the  sphere 
of  the  systematizer's  work. 


I  =■ 


' 


iii 


I 


i 
fHf 


CHAPTER    XVII 


THE    WORK    OF   THE    SYSTEMATIZER 

Relation  Between  Standardized  Accounting  and 
Systematizing 

As  stated  in  the  preface,  this  volume  was  planned  and 
developed  as  a  work  on  accountancy  rather  than  on  sys- 
tematization;  but  in  discussing  the  various  phases  of  ac- 
countancy, due  consideration  has  been  given  to  the  fact 
that  a  certain  amount  of  work  is  to  be  done  from  a  purely 
systematizing  point  of  view  so  that  the  operations  of  the 
business  may  properly  co-ordinate  with  its  accounting. 

In  other  words,  the  standardized  methods  of  account- 
ing set  forth  herein  do  not  interfere  in  any  way  with  the 
work  of  the  systematizer.  On  the  contrary,  there  is  ample 
opportunity  for  the  latter  to  develop  systems  that  will 
meet  the  requirements  of  a  specific  business  and  will  also 
fit  into  the  methods  of  accounting  outlined  in  this  volume. 
This  is  so  because  the  accounting  methods  presented  in  the 
foregoing  chapters  can  be  applied  to  almost  any  manu- 
facturing business,  not  only  in  principle  but  in  much  of  the 
detail  offered;  while  in  the  things  that  concern  the  sys- 
tematizer, there  is  much  less  opportunity  for  standardiza- 
tion, and  it  is  practically  impossible  to  devise  a  detailed 
system  that  will  apply  to  any  considerable  number  of 
manufacturing  businesses  in  different  lines. 

Special  Features  of  the  Systematizer's  Work 

To  illustrate  the  possibilities  for  the  systematizer,  a  few 

337 


338       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

special  features  that  properly  belong  to  his  field  may  be 
mentioned.  The  subject  of  "organization,"  for  instance, 
is  not  treated  in  this  book  further  than  to  show  the  rela- 
tion of  the  accounting  department  to  the  general  organi- 
zation, as  illustrated  by  a  chart  of  departmental  divisions. 
A  systematizer  would  take  this  chart  and  from  it  draw  up 
specifications  detailing  the  duties  of  each  department  head 
and  the  interdepartmental  relations,  especially  in  connec- 
tion with  office  work. 

Again,  this  volume  has  not  given  a  detailed  method  for 
making  the  sales  analysis  required  for  a  monthly  summary, 
or  for  the  routing  and  handling  of  sales  orders,  nor  has  it 
gone  into  the  details  incident  to  shipping.  All  of  these  are 
responsibilities  of  the  sales  department  and  worthy  of 
special  consideration  in  connection  with  system  work. 

A  matter  of  no  small  importance  is  the  compilation  of 
standard  data  concerning  drawings,  blue-prints,  etc.,  espe- 
cially in  laboratory  and  experimental  work.  None  of  this 
is  gone  into  in  this  work;  it  belongs  to  the  field  of  systema- 
tization  and  is  entirely  foreign  to  the  accounting  discussed 
in  the  foregoing  chapters. 

A  wonderful  opportunity  is  offered  the  office  man,  or 
systematizer,  in  connection  with  the  mailing  and  filing  de- 
partment. Here  it  is  his  function  to  design  and  develop 
such  methods  and  systems  as  will  facilitate  the  opening 
and  distribution  of  mail,  and  the  handling  and  filing  of 
correspondence,  etc.,  to  meet  the  particular  requirements 
of  each  individual  business. 

In  nearly  all  manufacturing  establishments,  and  espe- 
cially in  the  larger  concerns,  a  vast  amount  of  statistics  is 
often  handled  entirely  outside  of  the  accounting  depart- 
ment. The  figures  used  in  these  statistics  are  frequently 
derived  from  the  regular  books  of  account,  and  sometimes 
they  are  combinations  of  these  figures  with  those  obtained 


THE    WORK    OF    THE    SYSTEMATIZER 


339 


from  other  sources.  In  some  institutions,  a  statistical 
bureau  is  considered  of  almost  as  much  value  as  the  ac- 
counting department.  This  is  another  type  of  work  that 
must  be  designed  with  particular  reference  to  the  business 
it  is  to  cover,  and  which  lies  beyond  the  functions  of  the 
accountant. 

Office  Appliances 

The  suggestions  of  the  foregoing  paragraphs  offer  a 
worid  of  opportunity  for  the  ingenuity  of  the  systema- 
tizer. Furthermore,  many  kinds  of  appliances  have  been 
invented  to  facilitate  the  routine  work  of  the  office.  Some 
of  these  are  most  meritorious;  most  of  them  are  good;  but 
they  cannot  all  be  used  in  each  and  every  business,  and  it 
remains  for  the  systematizer  to  prescribe  such  appliances 
as  are  best  fitted  to  the  particular  business  under  con- 
sideration. 

As  examples  of  such  labor-saving  devices,  particular 
reference  may  be  made  to  the  dictaphone ;  to  the  various 
kinds  of  adding  and  computing  machines;  to  the  very 
intricate  calculating  and  accounting  machines,  such  as  the 
Powers  and  Hollerith;  and  to  the  various  devices  employed 
for  the  opening  and  sealing  of  letters,  registering  of  the 
same,  etc.,  to  say  nothing  of  the  various  kinds  of  type- 
writers, filing  cases,  etc.,  that  have  been  gotten  up  to  take 
care  of  individual  and  special  requirements.  The  specifica- 
tion and  installation  of  all  such  equipment  come  under  the 
head  of  systematizing  rather  than  accounting,  although 
the  accounting  work  should  be  so  designed  as  to  take 
advantage  of  any  and  all  mechanical  means  for  compiling, 
sorting,  and  distributing  figures. 

Finally,  it  is  a  very  special  kind  of  system  work  to  de- 
sign the  forms,  headings,  etc.,  under  which  tabulations 
shall  be  made  on  such  accounting  machines  as  the  Powers 


t:  f- 


340       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

and  Hollerith.  These  machines  not  only  cover  the  regular 
accounting  work,  as  indicated  in  the  foregoing  chapters, 
but  also  a  large  amount  of  statistical  data.  None  of  these 
forms,  headings,  etc.,  could  be  standardized,  but  must  be 
prepared  to  meet  special  requirements. 

The  author,  in  concluding  his  work,  is  especially  de- 
sirous of  calling  attention  to  these  facts  in  order  that  there 
may  be  no  misunderstanding  as  to  the  character  and  scope 
of  the  work.  Also,  he  wishes  to  emphasize  the  fact  that 
this  book  does  not  aim  to  be  and  cannot  be  a  panacea  for 
all  manufacturing  ills,  but  rather  confines  itself  to  specific 
lines  of  accountancy,  diverging  from  these  only  in  so  far 
as  certain  shop  practices  in  connection  with  industrial  en- 
gineering are  necessary  to  make  clear  the  accounting 
principles  and  practices  set  forth,  and  the  dependence  of  the 
one  on  the  other. 


i 


"i 


FORMS 


FINANCIAL  STATEMENTS  AND  REPORTS 


(Forms  referred  to  in  Qiapter  II) 


I 


if  ^! 


342 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 

Balance  Sheet 


Assets 

Amounts 

From  Last  Month 

From  Last  Year 

Increase 

Decrease   \ 

Increase 

Decrease 

Current:                             (■ 

Cash   in   Banks 

Petty  Cash 

Accounts  Receivable 

Accounts  Receivable  Past 
Due       

$25,070.20 

200.00 

120,172.80 

14,280.70 

3,280.00 

1,090.20 
6,602.00 

3,192.00 

2,166.20 

870.00 

*  *7,bbo.66 

14,000.00 

$26,6lb'.66 
7,314.00 

$6,526.98 

7,270.00 

798.00 
484.00 
350.00 

Accounts  Receivable  Con-^ 
signed 

Accounts  Receivable  Sus- 
pense    

Notes    Receivable 

Advanced    Expenses    In- 

212.58 
512.25 

Advanced    Expenses   Ad- 

venising    ............ 

Advanced      Expenses 

Treasury  Bonds 

Treasury  Stock  Preferred 
Treasury  Stock  Common. 

j 
Total    

it97.9H.10 

Net 

f28,6i8.S.J  1 
13,219.85  ' 

1 

$l5,m-98 

1 

Inventory:                          ; 
General  Stores 

$112,490.00 
47,153.15 
67,510.00 
56,410.55 

1 
$23,516.99 

$'1*7,1 27.'55 

13,021.25 

1,814.38 

•  •••••••• 

Work   in   Progress 

Semi-Finished   Stores 

Finished   Stores 1 

Finished  Stores  (Branches) 

Total   

Si8S,56S.70 

Net 

$23,516.99 

$31,963.18 
8M6.19 

Invbsticbnt: 

Real  Estate 

Buildings 

Buildings   Equipment. . . . 
OflBce     Furniture    and 

$40,000.00 

118.600.00 

26,700.00 

8,970.60 

138,677.72 

9,426.10 

11,286.50 

15,297.65 

4.200.79 

2,100.00 

1,000.00 

1,896.00 

■  "$324.6  i 

1,100.00 
1,890.15 
1,538.74 

320.00 
270.66 

£.auipment 

Machinery  and  Tools... 
T)i^«   and    Titrs 

Shop      Fixtures      and 

Fittings   

Miscellaneous  Eqmpment 
Patterns 

Drawings 

Patents 

Experimental  and  Devel- 
opment     

Good-Will  and  Agencies. 

t   

Total    

1^8,155.36 

$5,Ut.90 

1 

1                                          ; 

i 

Tntal     Assets.  •  •  • « 

$859.6^3.16 
Net 

S57.m.72,      $',7.r.92.lG      

10,216.56 

•******'* 

\    

Form  I. 


FORMS— FINANCIAL   STATEMENTS  AND   REPORTS  343 
Month  of  January,  31  days,  1917 


Liabilities 

Amounts 

From  Last  Month      1 

From  Last  Year 

Increase 

Decrease 

Increase 

Decrease 

Current: 

Accounts   Payable  Cur- 
rent     

$109,627.68 

20,180.00 

40,000.00 

560.00 

318.10 

$12,776.55 

1 

3,100.00 

$22,*600'.66 
1 

Accounts  Payable    Dat- 
ings    

Notes  Payable 

Taxes   Accrued 

Interest    Accrued    Gen- 
eral    

87.45 
47.37 

Interest   Accrued   on 
Bonds  

Interest   Accrued   on 
Mortgages   

Total    

1/70,685.78 

Net 

$16,011.37 

$22,600.00 
6.588.63 

Reserves: 

Reserve  for  Real  Estate 
Reserve  for  Buildings.  . 
Reserve     for     Building 
Eauioment  

$266.66 
1,550.66 

620.60 

346.89 

5,150.48 
182.60 

939.22 
199.41 
179.20 

6,666.66 

1 

! 

$33.33 
177.08 

45.75 

20.01 

550.33 
46.82 

108.11 
20.05 
14.75 

833.33 

Reserve  for  Office  Fur. 

&  Equipment 

Reserve    tor   Machy.    & 

Tools    

Reserve  for  Dies  &  Tigs 

Reserve   for   Shop   Fix. 

ii  Fittinsrs 

Reserve  for  Patterns, .  . 
Reserve  for  Drawings.  . 
Reserve  for  Patents. . . . 
Reserve    for     Bad    Ac- 
counts     

Bond  Redemption  Fund 

Total    

$16,102.38 

$1,8^9.56 

Capital,  Bonds  & 

Mortgages: 
Capital  Stock  Preferred 
Capital  Stock  Common. 

Bonds  

MortBaires 

$200,000.00 
400,000.00 



1 

Total 

$600,000.00 

Total    Liabilities 

$7S6,788.t6  i 

Net 

1    $17,860.93 

$22,600.00  \ 
h739.07  1 



Surplus  and  Dividends 
Profit  and  Loss  General 
Surplus  

$63,532.72 

! 

9,322.28 

$13,714.04 
1 

!      1,241.59 

1 

1 

) 

•  '  *     ! 

1 

Dividends     (Accrued) 
Preferred       

Dividends  Common 

': i 

Total  

$72,835.00 

1    $l.i,955.6S 

. 

Net   Liabilities j 

i 

$859,6^3.16 

$10,216.56 

i 
1 

II 


(a)  Balance  Sheet 


344       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 
Profit  and  Loss  Month  of  January,  31  days,  1917 


Analysis 


Revenue: 

Road  Racer  Model. . . 

Roadster  Model 

Special  Model 

Jobbing  Model 

Ladies    Model 

Juvenile's  Model 

Racer  Model 

Motorcycle    4    H.     P. 

Service    

Motorcycle    4    H.    P. 

Tourist   

Motorcycle    6    H.    P 

Twin    

Repairs    

Parts,      Semi-Finished 

Stores    

General  Stores 

Unclassified  


Month  of 
Jan.  1917 


From  Last  Month 


Increase        Decrease 


Total 


$2,814.15 

15,319.80 

7,420.00 

9,905.25 

1,179.90 

480.00 

420.90 

43,443.25 

33,326-45 

16,690.30 
3,411.90 

7,927.15 
454.95 


$li2,79i.OO 

Net 


$7,680.60 
4,090.75 

190.66 


34,762.08 


$285.00 

1,770.26 
66.66 


11,949.00 
1,320.78 

5,050.10 


Costs  of  Revenue: 
Road  Racer  Model. .. 

Roadster    Model 

Special  Model 

Jobbing  Model 

Ladies    Model 

Juvenile's  Model 

Pacer  Model 

Motorcycle    4    H.     P. 

Service 

Motorcjrcle    4    H.    P. 

Tourist    

Motorcycle    6    H.    P. 

Twin    

Repairs 

Parts,      Semi-Finished 

Stores  

General  Stores 


Unclassified 


Total 


Gross  Profit. 


Profit  and  Loss: 
>Jet    Commercial    Ex- 
pense     

Overhead  I  U-'ff 

Replacements  &  Guar- 
antees   


Net  Total   Expense . . . 

NetMonthlyJPj;f|- 

Profit  and  Loss  Gen- 
eral     


$2,082.47 

12,04944 

5,727.52 

7,825.14 

896.72 

367.60 

311.46 

34,325.85 

26,250.80 

13,262.00 
2,217.23 

4,782.77 
397.25 


$110,^96.25 

Net 


$6,130.80 
3,149.30 


144.40 


27,666.79 


20,106.97 


70.00 


122,298.17 


Eight 
Months 
To  Date 


$210.00 

>    ••••••• 

1,398.46 
50.82 


9,559.20 
858.00 

2,259.04 


$Ji9.767.5S 
S1,96S.18 


W2.297.75 


$17,285.30 
56.82 


$n,S42.1* 

Net 


$852.50 


$852.50 
592.65 


16,085.57 


59.50 


$17,80^.30 


$7,180.75 

44,780.00 

21,090.70 

40,275.15 

4,170.00 

3,280.00 

1,110.00 

216,210.90 

377,950.00 

42,675.85 
9,256.00 

15,816.25 
2,009.15 


To  Date 

Same 

Period 

Last  Year 


$785,80i.75 


$259.85 


$259.85 


$5,313.20 

30,002.60 

15,184.80 

35,039.20 

2,780.00 

1,870.00 

810.30 

170,113.80 

287,111,13 

30,736.00 
5,224.00 

9,115.12 
1,709.10 


$595,009.25 


$112,260.25 
5,680.25 


$n7,9iO.S0 


tU,9S5.6S 


$U,956.6S 


$72,855.00 
72,855.00 


Form  I.    (h)  Profit  and  Loss 


FORMS-FINANCIAL   STATEMENTS   AND   REPORTS     345 
Commercial  Expense       Month  of  January,  31  days,  1917 


Analysis 


General  Commercial 
Expense; 

Salaries — Officers 

Salaries— Clerical   ... 

Labor — General 

Telegraph    and    Tele- 
phone   

Office    Supplies 

Taxes,    Corporation..*. 

Legal  Expenses 

Patent   Expenses 

Bicycle   Royalties 

Frt.     and     Express 
Commercial    

Insurance  on  Stock. . 

Interest  Paid 

Discount  Allowed.... 

Rent   

Commercial  Reserve's*. 
Expenses  Unclassified 
Total    


Month  of 
Jan.  1917 


Selling  Expense: 

Salaries — Salesmen  .. 

Labor — General 

Commission  on  Sales 

Traveling 

Entertainment  ..!..! 

Rebates  and  Allow- 
ances   

Shows  and  Demon- 
strations   

Postage   

Umce    Supplies 

Adv.    Periodicals 

Adv.  Circulars 

Adv.  Catalogues 

Selling  Expense  Un-' 
classified 


$3,083.30 

2,82500 

525.00 

270.50 
285.90 

300.00 

60.00 

140.70 

136.75 
210.00 

762.dd 

75.00 

853.34 

178.66 


From  Last  Month 


Incr 


ease 


$150.00 
75.30 

62.25 


Decrease 


$9,706.15 

Net 


60.00 


Eight 
Months 
To  Date 


$37.00 
250.00 


115.56 


31.00 


•    •••••  I 


Total 


Grand    Total    Com- 
mercial   Exp 


$1,250.00 

350.00 

1,478.60 

903.50 

110.70 

578.00 


379.40 

275.00 

2,168.90 

2,000.00 


$m.ii 

63.93 


$300.00 


81.18 


$399.18 


500.00 
210.00 


Credit: 

Interest  Received 

Cash  Discount  Earned 
Credits  Unclassified.. 


309.00 


$9,803.10 

Net 


Total. 


Net  Commercial  Ex- 
pense    


$19,509.25 

Net 


61.50 


30.00 

100.00 

33.08 


$20,666.40 

17,250.00 

3,848.63 

2,003.76 
2,025.20 

••••••••a 

1,935.00 

486.49 

1,013.60 

957.00 
1,512.00 

'  *4,590'.56 

600.00 

4,462.00 

2,825.82 


To  Date 

Same 

Period 

Last  Year 


•  •••••• 


i 


'•••••• 


$6Jk,176.1,6 


47.38 


$650.00 

1,500.00 

73.95 


$1,281.96 
1,193.57 


$88.39 


$l,7i5.07 
1.257.50 


$88.39 


$7,500.00 

2,800.00 

7,647.80 

6,698.00 

797.60 

4,217.50 


2,652.81 

2,207.00 

15,297.20 

10,200.10 


$487.57 


$2,223.95 

Net 

$17,285.30 


Sales  for  Month. . . 
Com.  Percentage  for 

Month    

Sales  Percentage 

for  month* 


$H2,79100 
12.1% 
6.9% 


$85.00 
360.00 


$U5.00 
405.00 

$8.52.50 


2,262.38 


$62,280.39 


I    ' ' 


$40.00 


$126,456.85 


i  i 


$40.00 


•   •  •   •   ■ 


$42,745.14 


*-S7o 


$4,285.00 

9,360.00 

551.60 

$14,196.60 
$112,260.25 


$785,804.75 


^Ratio  between  Selling  Expense  and  Total  Sales  for  the  month. 
Form  I.     (c)  Commercial  Expense 


Ml 


346         UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 
Factory  Overhead         Month  of  January,  31  days,  1917 


Analysis 

Month  of 
i   Jan. 1917 

Fronj  Last  Month 

Eight 
Months 
To  Date 

To  Date 

Same 

Period 

Lait  Year 

Increase 

Decrease 

NoN-PaoDUCTivE  Labor: 
Foremen   

1 

$1,515.45 

950.64 

4,840.35 

$100.00 

50.00 

1,460.00 

$11,200.00 

5,900.00 

40,277.06 

157,377.06 

Clerks    

Manufacturing 

General 

Total 

$7,m.u 

$1,610.00 

Non-Productive  Mate- 
rial: 
Shipping  Supplies 

$1,560.75 
470.20 

915.00 
1,172.65 

$175.80 
90.00 

116.05 
110.00 

$9,875.62 
3,369.21 

6,211.85 
10,239.20 

Operating  Supplies 

Miscellaneous      Equip- 
ment   

Fuels  

General 

Total 

$4,118.60 

$m.85 

$29,695.88 

Non-Productivk  Ex- 
pense: 
Monthly   Depreciation.. 

$2,139.32  1 
798.00 
70.00 

*  "l',896.d6 

250.00 

165.00 

35.40 

'  $1 65  !66 

28.95 
18.75 

$23,942.08 

5,598.20 

560.00 

*  'i2,2'60.28 

1,625.90 

815.25 

212.55 

Monthly  Insurance 

Monthly  Taxes 

Monthly  Rent 

Frt.  and  Express  Mfg. . 
Current  for  Lighting. .. 

Gas  for  Lighting 

•.•.••••« 

Overhead  Unclassified.. 

Total   

*5,555.78 

$21t.70 

1 

Ii5,014.t6 

Grand  Total  Overhead 

$16,778.82 

$2,SU-55 

i 

1 

$132,087.20 

^1 1 

1 

1 

'1                       1 
Overhead  Used  (cb  80%  !     $16,722.00 

I 

•     ■••••••a      1 

$259.85 1 

1 

$m.m.9s 

5,680.25 

Overhead  {g""«^^r               56.8t 

{ excess  j 

— : ^1 

Productive  Labor  for                         1 
Month $20,902.50 

Overhead    Percentage 

for  month 80.27% 

1 
$3,218.00 

1.52% 

1 

Form  I.    (d)  Factory  Overhead 


FORMS-FINANCIAL   STATEMENTS  AND   REPORTS      347 
Factory  Production       Month  of  January,  31  days,  1917 


Analysis 


Production: 
Productive  Labor. . . . 
Overhead  Used  @  80% 

General   Stores 

Semi-Finished  Stores. 


Total  Monthly  Pro- 
duction   


Month  of 
Jan. 1917 


$20,902.50 
16,722.00 
45,954.22 
27,221.85 


From  Last  Month 


Increase     Decrease 


$3,218.00 
2,574.40 


$110,800.57 

Net 


Plus  Previous  Work 
in  Progress 

Total     Work    in 
Progress    


$64,280.70 


Finished  Production: 

Charged  to  Semi-Fin- 
ished Stores 

Charged  to  Finished 
Stores  

Charged  to  Better- 
ments   

Total  Production 
Finished    


$175,081.27 


$290.00 
6,441.77 


Eight 
Months 
To  Date 


To  Date 

Same 

Period 

Last  Year 


$5,792.40 


$6,731.77 
9S9.S7 


$21,200.60 

101,284.62 

5,44290 


Net  Work  in  Prog- 
ress     

Depreciation  Repairs: 

Labor    

Material   


$27,091.26 
5,442.90 


$16,345.98 


118,564.96 

118,564.96 

220,199.89 

89,273.12 


$576,248.09 


$22,780.00 


Total 


Charged  to  Reserves: 

Reserve  for  Real  Es- 
tate   

Reserve  for  Buildings 

Reserve  for  Building 
Equipment 

Reserve     for      Office, 
Fur.    &    Equipment 

Reserve     for    Machy. 
&  Tools .'. 

Reserve    for    Dies    & 

„  Jigs    

Reserve     for     Shop 
Fix.  &  Fittings. . . . 

Reserve  for  Patterns. 

Reserve  for  Drawings 


Total 


Total  Reserve  Charge 


Prog^?s's%T80.7r''"    ^°'^    '"    ^''"^'■^^^    ^^^•'53.15    and    Previous    Work    im 

Form  I.     (e)  Factory  Production 


I 


348       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


GENERAL  MANAGER'S 

SALES 

ITEMS 

QUANTITY 

VALUE 

MOTORCYCLES 

TD-DftY 

CUM. 

TO-DAY 

CUM        1 

OLD  MODELS 

NEW 

1 

TOTAL 

BICYCLES 

BACEQ 

BOAD  PACERS 

BOAOSTEB 

LADIES 

SPECIAL 

1 

JOB 

rCTTAL 

PACTS  OCDCCED 

kc:pairs 

GRAND  TOTAL 

1 

SHIPMEN 

TS                                                        1 

ITEMS 

QUANTITY 

VALUE               1 

MOTORCYCLES 

OLD    MODELS 

NtW 

TOTAL 

BICYCLES 

RACEB 

ROAD  RACERS 

ROADSTER. 

LADIES 

SPECIAL 

JOB 

1 

TCTTAL 

RftRTS  ORDERED 

REPAIRS 

GRAND  TOTAL 

•-  1 

Form  2,    General 


FINANCIAL    STATEMENTS    AND    REPORTS 


349 


DAILY  REPORT 


DATE, 


FINANCES 


ITEMS 


SANK  BALANCE 


REGULAR      {TRUST  FUNDS 


DCPosrrs 


TOTAL 


WTTHDRAWALS 


BALANCE  TO-DAY 


GRAND  TOTAL 


ACCOUNTS  RECEIVABLE 


NOTES 


TOTAL 


ACCOUNTS   PAYABLE 


NOTES 


TOTAL 


■    DIFFERENCE 


NEW  AGENQES 


BICYCLES 


MOTORCYCLES 


TOTAL 


TO-DAY 


NO.  OF  EMPLOYES 


CUMULATE. 


OTFICE 


TACTORY  N.P. 


PROa 


TOTAL 


REMARKS: 


HIRED 


DISCHARGED 


ONF*\YROLL 


Si?e  of  Complete  fc?rme^)<9i  inches    | 


= 


Manager's  Daily  Report 


FORMS 

PURCHASING  AND   RECEIVING 
(Forms  referred  to  in  Chapter  III) 


1  . 


352       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


ROGERS  MOTOR  WORKS 

BRIOGEPOBT,  CONN. 
TO  THE  PURCHASING  AGENT 


PURCHASE  REQUISITION 


NO.  1266 


WTE. 


.OCPT.Na. 


fOR  P.O.  NO. 


6.0.  NO. 


R.aNQ. 


.REQ.NCL 


tWOLY  ORDER  60005  LISTtD  BEUM  vyTTM  StWMDnS 

soASTOBcigceivePW- 


.ASfOXOWS: 


xuvSr 

QKTt 


QUMtrmr 


WHTlPf 
WMTED 


QUAMTITY 
WHM10 


owmTY 

ONOTOER 


giwrnn 

TO  BUY 


NOTE;  IN  MAKiNQ  oirr  this  requbtion, 

•CVCR  PUT  rmo  B0U6m  r»>OM  OFFtREIfT 
CDMCtRNS  ON  ■(>«  S«MC  SKtET.  If  IM  BOUBT,      fyiTr 

MMrt  OUT  stflWMTt  wauismoH.  '^"- 


PUR.  OROCR  Na. 
fROM 


ttscRiPTiON  or  rrtM 

OR  SYMBOL 


Dwtor 

DELIVERY 
REQUIRQ) 


5i3e  of  form  6  «  6  inches 
Original  whrhe.  Duplicate  ^How,Trtplicafe  p»nk. 


CAT.  NO. 
AND  SIZE 


LAST 
PRICE 


NOnCC:  EVERT  RCQUISmON,  NO  MAHER  BV  WHOM 
MADC  (ATT,  MUST  BE  CHECKED  BV  T>C  STORK  RE- 
CORDER, AS  TO  QUANTmr  ON  HAND,"  ON  ORDER,  ETC, 
BEFORE  PURCHASE  15  MADE. 


(SAME  NOnCE  AS  ABOVE)^-^^ 


THIS  COPY  TOR  PURCHASING  AGENT 


(SAME  NCmCE  AS  ABOVE  )...^0) 


APPROVED. 


CHECKED  BY 


tm  COW  ID  Be  RCTAINro  W  stores  RECORCtR  UWTL  60005  (gCEIva)       5TCPES  RECORDER 


Form  J.    Purchase  Requisition 


FORMS-PURCHASING    AND    RECEIVING 


353 


ROGERS  MOTOR  WORKS 

BRIDGEPORT,  CONN. 
MESSRS 


PURCHASE  ORDER 


P-NQ 


/C^^*  The  abav9  na  mast  be  on 
""^^      evgry  inmice  and  package 

DATE 


STORED  RtQNQ 
Please  ship  fbrar  account  10  the  above  address  FO.B.  ihefclbwtna 


tions  given  below  •■    Ship  via. 


QUANTITY 


DESCRIPTION  OF  GOODS 


Sije  of  Form  8i  » JOl  inches. 
Original  white,  Cbplicate  yellow, 
Trijrficate  pinK  aOuodpuplrcatcblue. 


DATE  OF 
DELIVER/ 
REQUIRED 


DISCOUNT 


NET 
PRICE 


^^'CE    All  goods  ««  held  subject  te>ourorxJer 

until  we  receive  an  invoice.    No  allow-        BV_ 

IhADnOTASr^  "*'"  ^  "^^^  ^  ^°*'"^  "^  Cartage.  PLANT  PURCHASING  AGENT 

iMfvRTANT  Acknowledge  receipt  of  order  and  iFarw 

/ifr?7?.5  backondered  advise  by  return  mail. 

123456769     10     it 


12     n>     lA     16     16_n_Jg_J9    20    21     K23    24Z52677?««»,« 


F 


NOTICE     TVHS  COPY  TO  BE  ALWAV5 

KEPT  IN  PURCHASING  HLE     ^^  BY. 


PLANT  PURCHASING  AGENT 
APPROVED 


l23456789K)1ll2i3tASifenie    ITWTy 


VWORKS  MANAGER 


22    2324252627282930^ 


NOTICE    This  Copy  fer  stores  Recorder  lobe  held 

hrhim  until  all  checking  is  done  and  ^- 

«Tcn  sent  to  accounting  deparTmenh,.,.*^ 

_^ ^^^ 

>23456789ioui2r3Uffii6r7   ts    19   2o   21 


PLANT  PURCHASING  AGENT 


22    23    24    S   26  27  7X  7Q  30  S 


NOTICE  THIS  COPY  FOR  RCCEMNS 

CLERK.    QUANTITY  AND  PRICE 
MUST  NOT  BE  SHOWN 


PLANT  PURCHASING  AGENT 


1    2    3    4    5    .    7    e    9   K)   n    ..   .~u    ,5  «    r;   «    ,.  ^  ,,   ;,   a  ,,  ^  ^  n-^lTiSTi 

Form  4,   Purchase  Order 


m 


354 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


TICKLER  CARD 


Wanted  by  Mr. 


Date 


19 


Subject 


RIc  Ncxs. 


-1    5ije  of  form  3  «5  Inches 
"M-irrfed  on  Manilla  Card 


FORMS-PURCHASING    AND    RECEIVING 


355 


PURCHASE  ORDER    N05. 


NAMt 


Sije  of  fbrm  3«5  inches 

Printed  on  white  card, 

bcAh  sides  alike. 


Form  5.    Purchase  Order  Tickler  Card 


MATERIAL  RECEIPT  AND  NOTICE 

ROGERS  MOTOR  WORKS 

BRlOaEPORT,    CONN. 

STOREKEEPER  AiSD  PURCHASING  AGENT    CATE 

WE  HAVE  RECEIVED  FROM  . 

V»A 


TWE  FOLLOWING  MATERIA! 

ON  ACCOUNT  OF  OUR  PURCHASE  ORDER  NQ 


Iexp.  bllno. 


TRANSPORTATION  CHARGES 


AND  PURCHASE  REQX.  NO. 


Form  7.    Purchase  Order  Numbers 


Sijc  of  form  6  «  ©i  inches 
Original  whiTc,  Dupliccr*cycllw,  Triplicate  pink  and 
Oue<)rup!icate  Wue  psoer.      The  last-  line  00  -fbrm 
5.^iould  read,  onlXj^-'icuV^.:  "This  copy  fbr Purchasing^ 
Agent.'  On  Triplicate:  'This  copy  for  Stons*  Recorder 
On  QuadruplJCHTr  ■ '  This  copy  Vied  by  Stones  Keeper* 


T 


I 


NOrC :  IN  EVtRY  INSTANCE  QCXX)5  MUST  Bt  COUNTEOL 
WEIGHED  OR  N«ASUREO  BCFQRC  LISTING  AeOVC. 
NCVCR  PUT  rrCMS  FROM  TVJO  PURCHASE 
ORDERS  ON  ONE  RCCEIVINQ  TICKET 


RECEIVING  CLERK 


THIS  COPY  HELD  BY  RECEIVING  CLERK 


DATE. 


CLAIM  VOUCHER 

ROGERS  MOTOR  WORKS 

BRIDGEPORT,    CONN. 


NCL 


WE  MAKE  CLAIM  AGAINST^ 


ON  ACCOUNT  0F_ 


5i3e  of  form  5i « Si  inches 
Originai  white  &Puplic3te_yellow  paper 


JCDSJL 


CONSIGNOR . 


PURCHASE  ORDER  NO . 
SHIPPER. 


*,  r 


INVOICE  NOl 


RCCEIVINQ  TICKCT  NQ. 


DATE  OF  SHIPMCfCT, 

ENTERED- 

RMD 


.VIA. 


CAR  NO. 


PURCHASING  AGENT. 


Form  8.    Claim  Voucher 


Form  6.     Maferial  Receipt  and  Notice 


FORMS 

GENERAL    STORES 
(Forms  referred  to  in  Chapter  IV) 


358       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


FORMS^GENERAL    STORES 


359 


GENERAL  STORES  REQUISITION 


YEAR 


MQ 


DAY 


TMia  amce  fon  STOoes  mulkji  i 


quAmrry 


UNIT 


PRICE 


AMOUNT 


BLOG 


LOCATION 


FLOOR 


AISLE 


BIN 


Co 


5 


QUAffnTY 


A  B  c  o  c  r  Q 

ORDER  Na 


SYMBOL 


STOCK 
BALANCE 


ARTICLE 


Sije  of  Fbrm  4*6  inches 
Origina!  white.   Duplicate  .yellow. 


DELIVER  TD  DEPT. 


BEFORE 


CSi9^ 


RECEIVED  THE  ABOVE 


CHARGED  IN  STORES  DEPT. 


J^aL 


CHARGED  IN  COST  DEPT. 


Form  JO.    General  Stores  Requisition 


STORES  CREDIT  MEMORANDUM 


YEAP 


MQ 


twr 


TMi*  aF»c«  »<3«  •noMcs  Ktena  omit 


QUANTITY 


UNIT 


PRICE 


AMOUNT 


BLD<j. 


LOCATION 


FLOOR 


AISLE 


A   B  C   D    C    P    G 
ORDER  NO. 


BIN 


SYMBOL 


QUANTITY 


ARTICLE 


Si3e  of  fbrm  4*6  inches. 
Original  white.   Duplicate  .yellow. 


OBTAIN   rROM  DEPT. 


BEFORE 


S^M. 


RECEIVED  THE  ABOVE 


CREDITED  IN  STORES  DEFT. 


JM. 


CREPmED  INCOST  DEPT. 


Form  II.    Stores  Credit  Memorandum 


36o      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


SHOP  STORES  REQUISITION 

TO  K  PStSeNTtO  TO  SOB-STORCS  KtCPCR.  W  OtM 
IS  NOT  ON  HAND  FORWARD  TO  STORES  RCCOROCR. 


DCLIVER  TD 


ON 


5t3e  of"  fbrm  4x6  inches 
Original  whfhe.  Dupticatgyllow 


QU^NTrTY  DetlVtRED 


Pirr  (XLY  ONE  tTEM  ON  THIS  TICKET 


TAG 


RECEIVED  TWE  ABOVE, 


III 


CHARGE  TD 


ORDER  NQ 


FORMS 

COMPONENT   AND    FINISHED    STORES 
XForms  referred  to  in  Chapter  V) 


IN  CHARGE 


Form  12,    Shop  Stores  Requisition 


362       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


■f 


FORMS- COMPONENT   AND   FINISHED    STORES 


'2 


Ci 


ro 


It, 


363 


1. 


I 


FORMS 

STORES— SPECIAL  FORMS 
(Forms  referred  to  in  Chapter  VI) 


366       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Acrt  No 

ASSEMBLY    REQUISITION 

TOR  PRODUCTION  OQOER  NO 

HATF 

Required 

Piece 

Pan 

No 

DELIVERY                                    1 

Date 

Quarrt-i-t>/ 

Unit 
Price 

Amount 

5t3c  of  fbrm  4  «  9i  inches 
Original  blue  &  DuolicaV  onk  carvr 

1 

1 ' 

L     ^ 

, , 

L^ 



1 

Sar\ai 

Form  15.    Assembly  Requisition 


I 


STORES-SPECIAL    FORMS 


367 


i   I 


368       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


STORES— SPECIAL    FORMS 


369 


Date. 


ROGERS  MOTOR  WORKS 

BRI^DGEPORT,     CONN.  N°      .63» 

STORE  CLERK'S  ORDER 


To  the  Superintendent:  Please  order  made  ttie  fdbwing  a^dca 

called  for  on  Shipping  Order  No. 

for  Stock.  Maximum On  Hand Minimum. 


QUA^fTlTY 


ARTICLE 


Sijc  c^  Torm  5t«Si  inches 
Original  blue,  Duplica-te  pinK. 


Chief  Stores  Oerk 


Form  18.   Stores  Clerk's  Order 


GOODS  RETURNED  TO  US  -, 
lEMQRANDlJM 
WE  HAVE  RECEIVED  THE  FOLLOWING.  RETURNED  fWM 


ROGERS  MOTOR  WORKS 

BRIDGEPORT,     CONN. 


^Mu 


OWTE 
SHIPPED 


DflXC 
RETURNED 


SHIPPED 
ON 

ORDER  NQ 


DESCRIPTION 


PRIME 
COST  AND 
HANDLING 


5i3e  of  rorm  6  «  St  inches 

Original  white.  Duplicate  pink 

and  Triplicstg  blue  paper. 


RETURN 
VALUE 


LOSS 


-  ij 


RECEIVIN6  CLERK 


CREDIT  MESSRS. 


FOLIO 


ADDRESS 


CHARGE  LOSS  TD 


SIGNED 


Form  IQ.    Goods  Returned  to  Us  Memorandum 


FORMS 

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MACHINE    AND    TOOL    STUDIES 


(Forms  referred  to  in  Chapter  VIII) 


2,yS       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


FORMS— MACHINE    AND    TOOL    STUDIES 


379 


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389 


NO- 


ENGINEERING    DIVISION 

ROGERS   MOTOR  WORKS 

BRIDGEPORT,   CONN. 

PRODUCTION  SCHEDULE 

DATE. . 


SYMBOL. 


TYPE 


COMPONENT  NO. 


TOTAL  REQUIREMENTS. 
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OCTt         OUAWriTV 


Sije  of  Tbrm  -  7^  "I?  inches  [ 


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273 

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6 

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6 

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6 

297 

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0 

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6 

309 

Form  36.    Production  Schedule 


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Form  35.    Manufacturing  Order 


390      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


NCL 


CNGINEECINC  CTV1SK3N 

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PURCHASE  ORDER  SCHEDULE 


CATC. 


SrtMieou 


TYPE. 


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OCTOBER 


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25 


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21 


28 


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PSRtllCZX 


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RHINO 


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273 


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291 


297 


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rrcM  Component 


Operations 


TIMC    {J\G€0  DAYS 


SCHCOULC  MO.    S 


CHRONOLOGICAL    CHART 

Rate   Per  OAf    loo  order  ho.-  278 


SEASON    1916 


JAN '^  AMY 


e       li      i2     t* 


»      u      i»      a* 


portent  Schedule 


INTENTIONAL  SECOND  EXPOSURE 


rrcM  Component 


TiMC    LAO   60  DAYS 


SCHCDULC   NO.     1 


CHRONOLOGICAL    CHART 

Rate   Per  Day    loo  order  no.>  278 


SEASON    1916 


OPERATIONS 


«  IS         22        n 


JAM'JkNV 


i      ti      n      M 


APRIL 


:HijfpiiMfetmi;i 


Form  sS.    Graphic  Chart— Component  Schedule 


rrcM 


tinr  A      -       WBKLY     SCMIEDUUE 

•     8    -    Vf*r9   ahkad  c^  behind   scheoule 

,       r     -      TOTAL     UNITS     AeSBMBLEO 
SCHEOULC    NO. 


CHRONOLOGICAL     CHART 

UNE    D- TOTAL  ^OOO    UNITS 

pate:  Per  PftY    IQOO 


ORDER  NO 


U»ie     E  -     PERCENTftSC     C   SOOO    UNITS 
,         p  _     flvERASE      NO.    OF    EM PUOreCS    DAILY 
•        G  -     NO.    or   UNITS,   OUTPUT     PER    MAN. 


SEASON 


Form  39.    Graphic  Chart— Unit  Schedule 


INTENTIONAL  SECOND  EXPOSURE 


ITCM 


tiNC  A    -     WEEKLY    Schedule 

•  B     -      D«V5    Ahead   o«r  BEHIND    SCHeOULE 

•  C     -      TOTAL     UNITS     A6SBM0LEO 

SCHEDULE   NO. 


CHRONOLOGICAL     CHART 

DNE   D-TCTTAL^OOO    UNtTS 

RpaB  Fen  pay    looo 


ORDER  NO 


Uwe     £  -     PERCENTftSE     C   SOOO    UNITS 

,      p  -    AvERASE    NO.  or  EMPuoreES  Daily 

•        G  -     NO.    or   UNITS,    OUTPUT     PER    MAN. 


SEASON 


:iiHlajiti:^a^^^^i''^^^^j^^^^ 


;:^;;i:n:;;n:-r:hr:-i^;:""-|;;'::-ii|:-":^-1'--:-^p; 


;•!;  .:: 


^^-^i#r^ 


,4:,-..; 


. ^ ..... .         , , 


u'j-*;-: 


-i.;:-;.*; 


mmm 


^:::i::::^ 


..^I^VIWIAVI'^VM:,:,, 


-ti^-n.i.^nrnHHi- 


■rrr" 


u;;.:;,:*;;::!::;.':  t^-'tfePHtttil^SSirSIiIi:  :rr;:'irlt:tin:ht!  -^.o^ -::^x:i:t;:-  -'-l-^""i '  ""'  -rr-^ 


tMSiaH?fe^i^^^^i^^ii^lM^2^..3i^^^ 


iiii^iii;n  ui ;:  i; ; ;  li-ii-; ; :  J : "" :  Liiii 


illi^*!g*#!!!!ill' '!>',J^  ;-:  :•  -r:!--r'-  -*  rr:-^ 


F'iJiliiiilui!!!  iniji 


iSii 


-:-hu~ 


wSC7C<S"»J •3^-'?rT'    *it:  i !  ■  .'i*|!'.Tr^ 


irf;^^|ri||pp^ri:lT:;^^ 


rr.tr 


■>**'"*♦ I---':-.    :r-t-t-- -. (■•-■• 


1 1 1 1  ^  ■  ■  ■  -  -  • 


-lH^;i^ 


Trrrrr 


trrr  wi'tWKWrf  trrrr  T 


.uu-u 


iBii 


rrr_ 


rrrtxt 


n 


JH 


J& 


w$-mmm 


ISiiii 


I::. 


;  :::;  ::::■:. ::::r:  ji 


■.|::;:u4!t:;j 


;.* 


:-:::) 


rrn-rr: 


frrHf^jn:iJTrT|3:;|:r::: 


;-:4Tr!:;:hHh!  Iffii;  ;;:-;:ii:-::: 


M»Mj 


li::a--Mr-ifi 


fe 


ililii 


M:.:r:;r 


fiiU 


.iiiiii 


iniilijirii  illli 


;;t;i: 


tttrtr 


Form  39.    Graphic  Chart— Unit  Schedule 


riTiiiiim-TTlii  T'lTi 1 


JW  ■ 


FORMS 


RELATING   TO    PRODUCTION 


(Forms  referred  to  in  Chapter  X) 


392      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


il 


IM 


if 


If  1 


DM1E. 


.SURNQ. 


CHARGE  TO. 


TO  BE  CXIMPLCTCD  NOT  LATER  T>1AN 

LABOR MATCRIAI OVERHEAD 


.  PPODUCTION  ORDER  NO. 

SALES  ORDER  NQ 

BlU  OF  MATERIAL  NO  . 


TOTAL  COST. 


-COOT  or  ONE . 


ThiaGayymuatbedriiygredat-oncgloChief  Slorga  Clerk.   No 
moterial  can  be  dflivered  Id  this  order  ewrpt  by  pfwentation 
of  proper  nex^tsrt-Bn  If  in  excess  of  quontity  nequined.  nxist 
be  O.Ktt.  by  proper  authtsrrty  j    ^        - 


APPROVtO- 


xr= 


m 


This  Copy  mujrt-  be  rrtained  in  PRODUCTION  DcparhDenf 
and  filed  ty  Hem  Number 


TOTAL  RfQUIREO 


CU\TE  PEQUlftCD 


STARTED 


lotNft 


Mt 


Quan.  Cumutetiw 


FINISHED 


CMb 


Quan 


Cumulative 


STARTED 


LotNa 


DMe 


Hjarv 


Cunnilativie 


8h«rse  aide  of  quadruplicate  of  aboM;  fbrvn. 
Iffanilla  cand.    Stre  of  rprm  5  x  S"  inchea 


FINISHED 


Dat« 


Quan. 


Cumilati^T 


Form  40.    Production  Order 


FORMS    RELATING    TO    PRODUCTION 


393 


Oflcrc. 


_  SUP  NO. 


OlARGETO. 


BETTERMENT  OROtR'  NQ 

AUTH0RrZAnC3N  NQ BILL  OF  MATERIAL  NOl_ 


TO  BE  COMPLETED  NOT  LATER  THAN 
LABOR MATERIAL 


OVERHEAD. 


_,TOTAL  cost. 


APPRC3VED' 


51:^6  of"  fbrTn-5'8  inches   Y 


T>ii5  Copy  must  be  delivered  at  once  to  ttie  Department 
wtiich  is  1d  do  the  work,  and  v^tien  finished,  nchmncd 
to  COST  Oepar+menf . 


Form  41.    Betterment  Order 


394      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Ij 


FORMS    RELATING    TO    PRODUCTION 


395 


OATt. 


.REPAIR  ORDER  NO. 


CHARGE  TO_ 


DONE  BY  DEPT.  NOL. 


f=ORDEPT.NQ_ 


Si^e  of  rorm-  S'8  inches   h 


This  Copy  musf  be  delivered  at  once  to  the  Department 
which  is  to  do  the  worK.  and  when  finished,  sent  to 
COST  Dcpartmenh 


This  Ccipy  must  be  delivered  at  cxice  to  COST  Department, 
which  will  immediafely  cjpen  up  Distribution  Accountai 


This  Gjpy  !nu^^  be  deSvered  at  once  to  Drafting  Department, 
which  will  immediate^  make  Drawing*. 


This  Copy  must  be  dcfivered  at  once  to  the  Axounting 

Department. 


Form  42.    Repair  Order 


i 


/tracing 

TAQ 

Rere  Nn 

( 

r\\    "fobem! 
Vy  y        with! 
._^        PQNc 

Date  to  be 
Finished 

>d< 
nl< 

:ou 

I. 

•^ 

Quan.StorheH 

r> 

Date 
Started 

Tbslag mus*  bt  altsched  to  W  «♦  <irst  opfration  and rem«in  wttti  'Hi 
aeitK«l  lot  through  A\  operations  till  mived  in  storw  as  floished. 
This  lot  mvist  not  be  split  up  nor  nmbined  with  another  k*. 

NO 

MACM 

M«CM 
NO 

oepT. 

NO. 

OUAN-  RECOV 
IITY      FROM 
EtCa  ttPWiS 

RfJCCTED 

0«tt 

iwrec- 

100 

FWRCr. 

x>v 

A 

6 

t 

^ 

T 

5i3e  of  form  3?  »6«inche5 

Printed  ori  Manilla  Tag  card. 

Fj 

T 

A 

J 

K 

L 

M 

\i 

P 

Stock 

Upon  completion,  mettrial  used  must  be  dtlHWtd  to  StDttj-ketper  and 
Ihd  lag  signed  and  deli^red  It  once  to  Stores  ReoTd  Oerti,1hen  tc  Soutinj  CbV 

No.  of  Pieces  Rer^ivrrl 

BinNn 

rtav 

3tono-l<Eeper              VeaarAOcA^              Routing  Clerk    | 

II 


/ 

/ 

( 

0^ 

) 

\ 

OP 
NO. 

MAOt 

MACK 
NO. 

ocn. 

NO. 

QUAN-  WCOV. 
IITY     fROM 
RECT)  REfAKK 

BEJECTtD 

DATE 

mstc- 

TOR 

fORBEf. 

SCRAP 

T 

R 

s 

T 

u 

V 

yy 

X 

V 

z 

AA 

nt^ 

a 

DO 

EE 

Q^ 

HH 

Sttock 

Remarks 

hi 

V. 

hi 


^ 


^ 


I 


396      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


DAY-WORK  PRODUCTION  TICKET  NO 


OflTE 
ttSUCO 


tWTETOBC 
COMPLTTED 


OCPT. 
NQ 


PROO. 
ORDER  NO 


MACH. 
NO. 


MAN'S 
NQ 


QUANTITY 
WANTED 


PIECE 
NO. 


PIECE 
NAME 


TIME 
ALLOWftNCE  K 


U 


MOVED  rpOM 
DEPT    Na 


MOVED  FROM 
MACH.  NO. 


MOVED  TO 
DEPt  NO. 


MOVED  TO 
MACH.  NO. 


Rcrr.NO. 


INSTRUaiONS 


SPEED  FEED 


f>ijc  cjf  Tbrm  4«6  inches 
Original  -  w^ii+c  paper. 
Duplicate-  manilla  card. 


NO.  OF  PIECES 
RECEIVED  rOR  THIS 
OPERATION  BY 
WORKMAN 


THESE  SPACES  TO  BE  FILLED  IN  BY  INSPECTOR 
REJECTED 


OfiTC  FINISHED 


FOR  REPAIRS 


FOR  SCRAP 


GOOD 


TOOLS  REQUIRED 


INSPECTOR 


ThijTictet  mu3^  be  retained  until  Lot  spedfied  is  completed  and  then  turned  in  at  once  to  PVrxJuctlon  Departmert 

Last  (tej  rf  each  month  si  TiOkfS  must  be  turned  in  and  if  Lot  e  uncoriplettd  must  be  so  sbmptd  and  8^ 


l\ 


TIME  ON  DAY- WORK  TICKET  NQ 

STOPPED 

STARTED 

TIME                1 

REMARKS 

WQULAR 

OVER       1 

hr   1 

Tbrm  shown  above.             | 

-^ 

TIME  USED 

HOURLY  RATT 

COST  REG. TIME 

CVBTTIME       HOURS 

BONUS  EARNED 

TOTAL  COST 

1 

I 


Form  44.    Day-Work  Production  Ticket,  including  Time  on 

Day-Work  Ticket 


FORMS    RELATING    TO    PRODUCTION 


397 


RECE-WORK  PRODUaiON  TICKET  NO. 


ISSUED 


DATE  TO  BE 
COMPLETED 


DEPT. 
NO. 


MACH 
NO. 


MAN'S 
NQ 


QUAtVTITY 
WANTED 


PIECE 
NO. 


PIECE 
NAME 


MOVED 

FROM  DEPT.  NO. 


MOVED 

FROM  MACH.  NO. 


^m^. 


NO. 


MOVED  TD 
MACH.  NQ 


ROT.  NO. 


INSTRUCTIONS 


SPEED  FEED 


Sije  of  fbrm  -4«€  inches 
Original-white  paper- ailing  red 
Puplicgte-buffcard- ruling  red 


NO.  OF  PIECES 
RECEIVED  FOR  THIS 
OPERATION  BY 
WORKMAN 


THESE  SPACES  TO  BE  FILLED  IN  BiC  INSPECTOR 
REJECTED 


DSTE  FINISHED  {fOR  REPAIRS 


FOR  SCRAP 


GOOQ 


TOOLS  REQUIRED 


INSPECTOR 


TIME  ON  PIECE-WORK  TICKET  NQ 

STOPPED 

STARTED 

TIME               1 

REMARKS 

RBJULAR 

0*'CR      1 

Brverse  oide  of  Duplicate  of  the   _ 

Fbrm  shown  8bov« 

SCHEDULE 
TIME  ALLOWED 

• 
TIME  USED 

MACH.  HATE 

AMOUNT  EARNED 

PIECE  RATt 

.0^ 

MANb  HOURLY  R*TE 

1 

Form  43,    Piece-Work  Production  Ticket,  including  Time  on 

Piece-Work  Ticket 


}  i 


II 


398      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


PREMIUM  PRODUCTION  TICKET  NO 


PROD. 
ORDER  NQ 


0«TC 
ISSUED 


CATtTOBt 
COMPLETED 


OCPT. 
NO 


MACK 
NQ 


MA^45 


QUANTTTY 
WANTED 


PIECE  NQ 


PIECE  NAME 


STANDARD 
TIMEEA 


TIME 
K    ALLOWANCE  H. 


M. 


MOVED  rPOM 
DCPT.  NO 


MOVED  fROM 
MACH  NQ 


MOVED  TD 
DtPT.  NO. 


MOVED  TD 
MACH.  m. 


HOT.  NQ 


INSTRUaiONS 


SPEED  fKD 


TOOLS  REQUIRED 


Sije  of  rbrm  -4*6  inches 
Original  -  whrte  paper-  red  ruling 
Duplicerte  -  buff  card  -    " 


NQ  OF  PIECES 
RECEIVED  TOR  THIS 
OPERATION 
W  yKJRKMAN 


THESE  SPACES  TD  BE  FILLED  IN  BY  INSPECTOR 
REJECTED 


DWt  DNISHEO 


rOR  REPAIRS 


rOR  SCRAP 


GOOD 


INSPCCTDB 


TIME  ON  PREMIUM  TICKET  NQ, 

STOPPED 

STAJ3TCD 

TIME                1 

REMARKS 

KGULAR 

<?^     1 

UBversc  side  of  Duplicaie  of  i\ 
form  ahov/nfibovfe 

yc    - 

- 

TIME  ALLOWED 

TIME  USED 

LESS  3P0ILAQC  TIME 

COST  RCa  TIME 

TIME  5AVCD 

PREMIUM  EARNED 

— < — 

HOURLY  RATE 

TOTAL  COST 

— » 

Form  46.    Premium  Production  Ticket,  including  Time  on 

Premium  Ticket 


FORMS    RELATING    TO    PRODUCTION 


399 


DAILY  DAY-WORK  PRODUCTION  TIME  SLIP 

rod  TIME  ON  DAILY  DAY-WORK  PROD  TICKET  NQ 

PROD       OPEPATION 
ORDER  NO,         NO. 

LOT 
NO. 

PIECES 

MADE                                VIACH.NO.                                    UtWI'.  NO. 

MAN'S  NQ 

STOPPED 

STARTED 

ELAPSED 
TIME 

REGULAR 
TIME 

S13C  of  rbrm-  2 J  «6  inches 
Printed  and  ruled  in  black 

OVER- 
TIME 

THESE  SUPS  MUST                                  0-*<- 
BE  TURNED  IN  DAILY 

FOREMAN 
CLERK 

Form  47.   Daily  Day-Work  Production  Time  Slip 


DAILY  RECE-WORK  PRODUCTION  TIME  SLIP 

FUR  TIME  ON  DAILY  PlECE-VyORK  PROD.  TICKET  NQ 

PROD. 
CRDCRNQ 

OPERATION 
NO. 

LOT 
NQ 

PIECES 

MADE                             MACH.  NO.                                  OEPT.  NO. 

MAN'S  NO. 

STOWED 

STARTED 

EIAP5ED 
TIME 

REGULAR 
TIME 

^3?  of  Torm -  2^  "6  inches   . 

Printed  and  ruled  in  green 

CVCR- 
TIMC 

THESE   SLIPS  MUST                                    OK. 

BE  TURNED  IN  OMLY                                                                                                                               HDRCMAN 

CLERK 

Form  48.    Daily  Piece-Work  Production  Time  Slip 


400 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


1.1 


DAILY  PREMIUM  PRODUCTION  TIME  SLIP 

FOR  TIME  ON  DAILY  PREMIUM  PROD.  TICKET  NO 
MAOe                           MACH.NO.                              oepT.Na 

PPOO. 

OPoeoNO. 

OPtWATtON 
NO. 

LOT 
NO. 

MAN'S  NO. 

STOPPCD 

STARTED 

ELAPSED 

time: 

REGULAR 
TIME 

5i  je  d(  form  -  2  J  »6  inches 

~  Printed  and  ruled  in  red 

CVCR- 
TIME 

THESE  SLIPS  MUST                                       OX-                                                                                    i..^^^*.. 
BE  TURNED  IN  DAILY                                                                                                                        'V*^'^ 

— CLEW'S 

Form  49.    Daily  Premium  Production  Time  Slip 


DAILY  DEFECTIVE  REPAIRS  TIME  TICKET 

RATE                                                       DCPT  NO.                                                     ^^N'S  NQ 

5TOPPCO 

TIME 

AMOUrfT 

NO,  OF 
PIECES 

PIECE 
NO. 

PROD. 
ORO.  NO. 

STARTED 

[_— 

STOPPED 

STARTED 

TOTAL 

DESCRIPTION  OF  WORK  AND  REASON  FOR  REPAIRS 

1 : : — r- — : r 



S13C  of  form  -  4  •  t)  incncs   r 
Prin+cd  on  blue  card            | 

Form  50.    Daily  Defective  Repairs  Time  Ticket 


] 


FORMS    RELATING    TO    PRODUCTION 


401 


.DAILY  WAITING  TIME  TICKET 

MAN*^  NO 

PFPT  N*^ 

REGULAR  TIME 

DESCBIFTIC»N  OF 

WORK 

STOPPED 

STACTTEO 

TIME 
USED 

0^fll^TIME          ■ 

STOPPtD 

STARTED 

TIME 
USED 

PF(31  n  AD  TIMP  ♦ 

(VTRTlMr    ^ 

•^rjr^y,  cr^T  * 

THESE  TICKETS  MUSI 

5i3e  of  Form  -  4  «  6  inches 
Printed  on  manilla  cord. 

FOREMAN 

BE.  TUKNtD  IN  DAILY. — | 

Form  51.    Daily  Waiting  Time  Ticket 


DAILY  BETTERMENT  TIME  TICKET 


MAN'S  NO.. 


BETTERMENT  ORCCR  NQ. 


OEPT.  NO.. 


REGULAR  TIME 

STOPPED 


DESCRIPTION  OF  WORK 


STARTED 


O^i^RTlME 


TIME 
USED 


STOPPED 


STARTED 


TIME 
USED 


NO.  HOURS  REGULAR  TIME. 
NO.  HOURS  OVERTIME 


.HOURLY  RATE. 
.HOURLY  RATE 


.REGULAR  TIME  »_ 
OVERTIME  *_ 


THESE  TICKETS  MUST 
BE  TURNED  IN  DAILY 


5136  cf  form  -  4  «  6  inches 
Pri ntp.d  on  manilla  card 


TOTAL  COST  *. 


FOREMAN 


Form  52.    Daily  Betterment  Time  Ticket 


402 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


'  i 


DAILY  REPAIR  TIME  TICKET 


REPAIR  CJROCRNO. 


VlA^45Na. 

OCPT.  Na_ 


REGULAR  TIME 

STOPPED 


STARTED 


Cfi/EKrTlME 


TIME 
USED 


STOPPED 


STARTED 


TIME 
USED 


DESCRIPTION  or  WORK 


NO.  HOURS  REGULAR  TIME. 
NO.  HOURS  OVERTlMe 


HOURLY  RATE. 
HOURLY  RATE. 


.RtQULAR  TIME*. 


OVERTIME 


"THESE  TICKETS  MUST 
BE  TURNED  IN  DAILV. 


Sise  of  Eorm  -  4  »  6  inchca 
Pnnted  on  manilla  card. 


TOTAL  COST  ♦. 


-fDRCMAN 


Form  52.    Daily  Repair  Time  Ticket 


DAILY  PRORATING  ORDER  TIME  TICKET 

»w1an!5  no.. 


PRORATING  OROCR  r«L. 


OEPT.  NQ. 


REGULAfe  TIME 

STOPPED 


STARTED 


CNCRTIMC 


TIME 
USED 


STOPPED 


STARTED 


TIME 
USED 


DESCRIPTION  OF  WORK 


vex  HCXJRS  RCaULARTIMC 
Na  HOURS  CVCRTTMC-^. 


.HCXJRLY  RATt- 
.HOURLY  RATE  . 


.REGULAR  TIME*. 


OVERTIME.*- 


Tx^orrs  MUST 

TURNED  IN  OMLY 


■Pri 


nted  on  manlllo  cand. 


TOTAL  OOSTI. 


.TOREMAN 


Form  54.    Daily  Prorating  Order  Time  Ticket 


FORMS    RELATING    TO    PRODUCTION 


DAILY  NON-PRODUCTIVE  LABOR  TICKET 


MAN'S  NQ. 
DEPT.  Na_ 


REGULAR  TIME 

STOPPED 


STARTED 


OVERTIME 


TIME 
USED 


STOPPED 


STARTED 


TIME 
USED 


DESCRIPTION  OF  WORK 


NO.  HOURS  REGULAR  TJME- 
NO.  HOURS  OVERTIME  ,     , .. 


HOURLY  RATE. 
HOURLY  RATE. 


-REGULAR  TIME*. 


OVERTIME   *_ 


THESE  TICKETS  MUST 
BE  TURNED  IN  DWLY 


Si3e  of  Form  -  4  «  6  inches 
Prin-ted  on  manilla  cond. 


TOTAL  COST  1. 


403 


-fOREMAN 


Form  35.    Daily  N on-Productive  Labor  Ticket 


4 


I 


SUPPLEMENTARY     TAG 

lots  mus»  not  be  ap'''^  ficept  on  emcraency,  and 
must  not  be  combined  with  another  Br 

piece  No ^PQ 

fert  of  Lot-  No 


Taken  from  Lot  for  Operation  Nol 

Op  Name    

Date  By  wtlon^ 

Taken  from  Oept  No  

Reason  


Balance  of  operations  and  routing  must  be 
copied  below  noTi  original  Tag 


MACH 


MACM 
HO. 


Dtfn 

NO 


QUAN 

Rtrti 


fORdO'  SCRAP 


RtJECrt.0 


OATC 


IN5«C- 
TOR 


5136  of  rorm-  ;^  I  fei  inchea 
Printed  on  Red  Tog  cord 


Upon  completion,  material  must  be  delivered  to 
Stonts-keeper  and  thu  tag  signed  and  delivered  a*  once 
te  Stores  Record  CierK.men  to  Schedule  Clerk. 

No.  of  Pieces  received     

Bin  No    Date 


Stores- keeper . 
Record  Qcrk 


Indicares  a 
gneenbond 
across  tog 


Form  56.    Supplementary 
Tag 


RCJECTtOPOft^ 
SCRAP 


Dote  Rejected 


Lot  No 


l!t)tct«l 


Piect 
Na 


Pejeded  ot  Qperohon 


No. 


Nome 


Different  pieces  or  ttie  some  pieces  naquinng 
diffcrmt  repairs  or  mode  on  differoTt  production 
orders  musf  not  be  put  on  ttiis  tog. 
REASON  FOR  RCJECrriON 


Sijc  of  Form  -  3g « 64  inctlCS 

tVinted  on  Manilla  Tog  Card 


Rfecetvcdabowe, 
fbr5crop 


.Kecea 


Date. 


EntCnedifProd. 
Onl  Record  _ 


Stores- keeper 


fntChg.to 
Scrap  Actft . 


Oerk 


aerk 


Form  57.    Rejected  for 
Scrap  Tag 


404 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


© 


Repair  Tag 


REJECTED 

fective:  repai 


ected 


^1^3 


LotNQ 


No  of 
Pieces 


Rece 


Bcjtctedi  No 


Mode  on 

tonJerNa 


BjjediKJ  3t  Opera+ion 


No 


Name 


REPAIRS    RCQUlBtO 


5<3e  of  fbrm  -  34  »  6i  inches 
Pnnted  on  Manilla  Tag  Card 


fitfeirs  °        tele 
parted 


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fix  Optratipn 


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ttoedOK. 


Date 


Inspector 


If  operstions  an  *  be  f  niihnJ  without  combining  with  rtg- 
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Sub- Order   Station 


STOCK  T?OOM 


p  •  PlNl5HeD   WORK 
ROOCM  MAT'L 
SlCNCO    POKM 

J    •  I>All.V  T1M£  CARO 


Form  50.    Order  Control  Chart 


Form  60.    Order  Control  or  Planning  Board 


ii 


FORMS 

RELATING   TO    LABOR 
(Forms  referred  to  in  Chapter  XI) 


4o6       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


ROGERS  MOTOR  W0RK5 

BRIDQePORT,      CONK 

APPLICATION  fOR  EMPLOYMtNT. 


Nanieinfull 


.Dote 


.19. 


Add»T5S 


Trade. 


Nationality -»Place  oF  Birth  _ 

If  of  fcreign  Birth,  how  long  have  you  been  in  United  States  _ 
Natural  i3«cl  Harried  or  Single 

Prtviously  in  our  employ  1 

Experience  ______«______^_____ 


Age 


.  No.  of  Children  _^ 


Date. 


.Dept. 


fefcTtnce. 


513*  of  rcirm  -  4.  »  6  inches 
Printed  00  Manilla  cond 


Name  of  Relatives  employed  by  Rbgers  Mdor  Works . 


DO  fJOT  WOTE  BELOW  THI5  LINE. 


Pafe  Employed 

Date  Rc-€mployed_ 


.Dept.  No. 
_Depr.No.. 


-Application  No. 


.Rlc  Na . 


Dale  Be-emplo^. 


.Dept.  No._ 


INDICATE  BELOW  THE  POSITIONS  YOU  HAVE  HELD. 
GIVING  IN  THE  TOP  SPACE  YOUR  LAST  EMPLOYER. 

CMPLCfYCR 

WSITIONS 
YOU   HAVE  HtLD 

APPROXIMATE 

DATE  OF  EMPU)YME^rr 

WAfiCS 

FPOM 

TO 

NAME 

ADoerss 

NAMC 

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ADDRESS 

NAME 

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At30etSS 

Are  you  ^ 
How  soon 

(Orkino  o^  crescnt' 

canyx)  report  fix* 

«-irW7 

^ov«J_J 

Form  61.    Application  for  Employment 


FORMS    RELATING    TO    LABOR 


407 


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FORMS  RELATING  TO  LABOR 


409 


Reference  Inquiry  Letter 
Rogers  Motor  Works 

File  No 

Bridgeport,  Conn., 191. , 


Application  No. 


* *.* • ' "'V h^s  filed  an  application 

with  us  for  employment  and  gives  your  name  as  one  of  h....   past 

employers,  working  under  

We  shall  very  much  appreciate  an  early  reply  to  the  questions  on' the 
back  fold  of  this  sheet,  and  thank  you  in  advance  for  your  attention 
to  the  matter,  which  will  be  treated  confidentially. 

Very  truly  yours, 

Rogers  Motor  Works, 

By 

Form  63.    (a)  Reference  Inquiry  Letter  (first  page  of  fold). 
Size  of  folded  page,  6X8  inches 

Rogers  Motor  Works 

Bridgeport,  Conn. 

Reply  Form 

Name 


Application  No. 


191.. 


Period  of  employment 

Date  of  termination 

Cause  of  termination [[[ 

Salary  $ per 

In  what  capacity  was he 

Was he  competent  ? 

Was he  reliable? , /........,.., 

Was he  honest? 

Was  he  in  the  habit  of  using  intoxicating  liquors  to  excess^ 

Would  you  consider  h....   worthy  of  confidence  and  so' recommend 

n for  a  similar  position 

Remarks 


Name  of  employer. 


By. 


Form  63.    (h)  Reference  Inquiry  Letter  (fourth  page  of  fold- 
inside  pages  blank) 


4IO       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


ROGERS  MO  lOR  WORKS 

BRIDGEPORT,     CONN. 

WTE                                                  REQUISITION  FOR  HELP 

BUILDING  NO                           FLOOQ  NO                           DEPt  NQ                          TIME  STATION  NQ 

NUWeCR 
WAN  1  to 

KIND  OF  MEN  WANTED 

DATE 
WANTED 

APPROXIMATE  RATE  1 

SijC  of  Form  -  4  "G  inches 
FVinted  on  Manilla  Card 

STATE  ABOVE,  NATURE 
OF  WORKMEN  WAN  I  ED 

As--^  fn«?rMAN 

mPFMAN 

MAKE  OUT  SEPARATE 
REQUlSmON  FDR  EACH 
KIND  OF  MEN  WANTED 

APUWOVFD                                                                                               SllPT 
APPPOVFD                                                                             M/ODK*;  MPiV 

FORMS    RELATING    TO    LABOR 


NAME 


ADDRESS 


FOR  DEPT.  NO. 


TIME  CLOCK  NO. 


TRADE 


NATIONALITY 


CHANGE 

OF 
WAGES 


DATE 


RATE 


CHANGE 

OF 
DEPT 


DATE 


DEPT.  NO. 


CLOCK  NC 


O.K. 


DATE  QUIT 


411 


ROGERS  MOTOR  WORKS 

BRIDGEPORT,      CONN. 

EMPLOYEE'S  RATE' CARD^ 


DATE  EMPLOYED 


A.M. 


RM. 


BUILDING    Na 


FLOOR  Na 


TIME  STATION  NQ 


RATE  PER  WEI 


HOLBJ 


NATURALIZED  MARRIED  CHILDREN 


5i3c  of  rbrm  -  4 
•intcd  on  Mani: 


frir 


«6  Inches.  \ 
llacand.      I 


DIVISION  HEAD 


5UPT 


CAUSE 


ALL  CHANGES  IN  RATES  MUST  TAKET  PLACE  AT  COMMENCEMENT  OF  A  FttY  PEWOO. 


NAMES  OF  MEN  SENT  FDR 

DATE 

REMARKS 

.. j  feverse  side  of  Form  alxvcl 

Form  64.    Requisition  for  Help 


ABSENT  RECORD 

HOURS 

HOURS 

HCXJCS 

HCXJB3 

HOJCS  1 

DATE 

AM 

P.M 

DATE 

AM 

RM. 

DATE 

AM 

PM 

DATE 

AM 

RM. 

DATE 

AM 

RM 

1 ' " 1 J- u _^ 

.  02%crse  side  of  farm  shown  abo\e.  L 

^^— 

_^ 

1    : 

h 

j 



— _ 

f 

1 

ABSENCE  MUST  BE  SHOWN  FROM  EVEEY  HALT  HOUR  (JR 

Form  65.    Employee's  Rate  Card,  including  Absent  Record 


i^ 


412       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


ROGERS  MOTOR  WORKS 

BRIDGEPORT,      CONM 

INTRODUCTION  CARD 


BUILWNG  NO. 


FLOOR  NO, 


DePT»>0. 


TtMC   STATION  NO 


To. 


.  in  Dept.  Na 


The  bearer. 


is  sent  Id  you  in  response  to  yjur  order. 

for 


.^. 


YraQCS- 


.per  Hour 


5ije  of  TbrTn-4»c.  inches 
frirr+ed  on  Manilla  card 


tjTjplcymerTi'  Dept: 


7b  be  filled  out  and  returned  immediaie/v  to  Gvphywenf  Ikpk 
Started  wcrk  af o'clock.  Morrf-h toy 


No^. 


-Suptv 


By. 


Assf.  Tbreman. 


Form  66.    Introduction  Card 


ROGERS  MOTOR  WORKS 

BRIDGEPORT,    CONN. 

CHANGE  IN  rate: 


namc 


CLOCK  NO. 


OCCUPATION 


DEPT.  NO. 


COMMENC1NQ 


CATC 


FORMER  CHANGE   (to  BCnwaneD  w  Accounrwe  t»T) 


FROM 


FROM 


TO 


TO 


REASON 


StTC  of  fbrm  -   4  »  &  inches 
■'Printed  00  Manilla  cand 


.fOREMAN 


CHANGES  or  RATE  WILL  TAKE        . 

PLACE  ONLY  AT  THE  BEGINNING 

OPA  WVY  PERIOD.  APPO^/ED. 


.DTVISJON  HtAO 


.SUPt 


APPROVEU. 


.WORKS  MANAGER 


Form  67.    Change  in  Rate  Card 


FORMS    RELATING    TO    LABOR 


413 


ROGERS  MOTOR  WORKS 

.BRIDGEPORT.      CONN. 

CHANGE  OF  DEPARTMENT 

NAME                                     •                                                                CLOCK  NO. 

OCCUPATION                                                                                        DEPT. 

COMMENCING 

FROM  DEPT 

TD  DEPT 

DATE 

FORMER    WORK 

CHANGE  or  EMPLOYEE'S  NO. 

FROM  NO 

TO  NO. 

NEW  WORK 

REASON 

1 

5i:e  of  Form  -  4>'6  inches 
"Printed  on  Manilla  cand 

FnOFMANI 
ANY  CHANGE  or  RATF  WILL  NCfT                                                                                      A«^CT  RnDFMAM 

TAKE  PLACt  UNTIL  COMMENCE- 

MENT  OF  A  F^Y  PERIOD.                         f  aPPROVEH^                                                                      ^  ror 

(APWOVED^        NAWDKS  MANAGER 

Form  68.    Change  of  Department  Card 


DATF 

ROGERS   MOTOR  WORKS 

BRIDGEPORT,     CONN. 

REPORT  Of  ABSl 
TiMF  i^ATinN  Nin                            nt 

iNTEE 

iPT.  NO. . 

:s 

CLOCK  NO. 

ABSENT 

CLOCK  NO. 

ABSENT 

CLOCK  NO. 

ABSENT            1 

A.M. 

RM. 

AM. 

RM. 

A.M. 

RM. 

■ 

SijeofPorm-  4«6  inches. 
Printed  on  white  paper. 

NUMBER  PRESENT 

SinNFD 

NUMBER   ABSENT 

TIMEKEEPER. 



Form  69.    Report  of  Absentees 


Ai^       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


ROGERS  MOTOR  W0RK5 

BRIOQtPOCT,       CONN. 

QUITTING  CARD 


NAME 


_  DATe 


ADOCJESS 


.  OCCUPATION  . 


CATC. 


.  LENGTH  OF  SERVICE 


EMPLCrrEE*5  REASON 


FELLOW  EMPLOYEE'S  REASON 


INSPECTORS  OPINION  . 


R>CEMAN"5  RECOMMENDATION. 


Sije  of  fbrm  -  4 » 6  Inches. 
Printed  on  Manilla  card 


ACTION  TAKEN 


IN  EFFECT 


A.M.. 


.P.M. 


SGNED. 


.INDUSTRIAL  SECY. 


ALWAYS  ENCLOSE  THESE  CARDS  IN  A  SEALED  ENVELOPE 
TO  BE  FILED  WITH  ODlGlNAL  APPUCATION  CARD 


RECORD  OP  employee: 

FOREMEN  WILL  FILL  OUT  THIS  CARD. 


WOBK 


FAST 


AVERAGE 


SLOW 


ABILITY 


tXCEUCMT 


GOOD 


FAIR 


POOR 


CONDUCT 


GOOD 


FAIR 


POOR 


INDICATE  ABOVE  BY  PUTTlNCi    X    JN  SQUARES 

WAS  HE  ABSENT  FROM  WORK  FREQUENTLY  ?    

HONEST  ? . — —  LCJYAL  ^ 


IS  THERE   ANY  REASON  WHY  HE    SHOULD  NOT  BE  RE-EMPLDYEDJ_ 


Reverse  side  of  fbrm  shown  abcwcj 


TO  CASHIER  ' 


F»Y  THE  ABOVE-NAMED  PERSON  FOR  

-PER  HOUR.  ]  NO  P'ECES ©  PCQ 


HBS 


.MIN. 


, AMOUNT. 


aK_ 


FOREMAN 


HEAD  OF  DIVISION 


Form  70.    Quitting  Card,  including  Record  of  Employee 


FORMS    RELATING    TO    LABOR 


41S 


ROGERS  MOTOR  W0CK5 

BRIDGEPORT,         CONN. 

MONTHLY  RECORD  OF  EMPLOYEES  DISMISSED  Oi^  RESIGNED 
^^•^-  Year  19 


MONTH 


REASONS 


JAN 


Nay. 


Unsatisfectefy  work 


Emplqyee  dissatisfied 


Undesirable  employee 


Another  position 


111  health 


Sickness  in  family 


FtB. 


NQ 


g 


MAR 


Account-  injury 


Death 


References  unsatisfedory 


Attend  schcxsl 


Matrimony 


Remain  at  home 


Ijeavinq  city 


Non-attendance 


Tardiness 


NO 


Never  ngported 


No  reason 


Ownaccom 


rirm  moving 


Lack  of  work 


Refuse  to  acknowledge  errpr 


Jio  advance  in  pay 


Reduction  m  pay 


Stealing 


No  advance 


Dishonesty 


Special 


APR 


NO. 


MAY 


NQ 


JUNE 


NO 


^LY 


NQ 


^ 


AUG 


NQ 


SCPT 


NQ 


OCT. 


NO. 


530  of  Form  -  8i  X  n  inches 
Printed  on  white  paper 


■fotal 


Dept.% 


NCV. 


NO. 


DEC 


NO.% 


TOTAL 


NO 


% 


COMPARISONS   AND  PERCENTAaES 


Total  negjgned 


"fatal  dismissed 
Total  out 


Average  No-emploved  daily 


%l?esiqned-bava.ED. 


%  Dismissed  to  pt/q.  ED. 
'X>Total  out  to  sNOi.  LpL 


No.  employees  hired  daily 


%  Hired  tp  daily  avq.  E.D 


No.  advanced  in  pay 


No.  pnamoted 


No.  transfemsd 


immi 


form  71.    Monthly  Record  of  Employees  Dismissed  or  Resigned 


I 


4i6      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


PAY.  CHECK 
Received  ftil  I  payment  of  all  demands  to  and  including 
(DATE)_-_ 19— 


REGULAR  AND  EXTRA  TlMt 


tegular  Time . 

Extra  "Hmc 

Piece- voH< 

Total 


JLc3sAdv.acxrtln&  . 

Less  other  Advances 
NET  PAY 


AMOUNT 


Sign  name  hens 


Address  here 


HOTE-  Hb  money  frill  be  delivered  until  this  stub  ispreaenlxd, 
■  properb/ si^ed.  if  lost,  rqxrtatonceiDRjylkpsrtTnent. 

No.  ^—m—.  /  f^rfbrahon 


Na 


TIME  CARD 


DtPT.. 


NAME. 


pfti  PCRiOO  CNDtNq 


.19 


Na 


Expense  Charge 


DAY 


AJvl. 


IN 


Regular  Time 
Extra  Time  _ 
Piece-work  _ 
Total      


Less  Advances  Acc't  Ins.. 
Less  other  Advances 


NET  PAY 


NOON 


oirr 


IN 


RM. 


OUT 


AMOUNT 


EXTRA  TIME 


IN 


OUT 


Sje  of  rorm-  4  «  9i  inches 
Printed  on  Manilla  card. 


HOURS 


O.K. 


JTlMEKCtPCR 


APPROVED  ©«'. 


PAYMASTER. 


Form  72.    Pay  Check  and  Time  or  Clock  Card 


FORMS    RELATING    TO    LABOR 


417 


J2 


^ 


4i8      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


FORAIS    RELATING    TO    LABOR 


419 


PAY  CHECK 

Received  full  payment  of  all  demands  to  and  including  the  da+c  bdow. 
5JGNC0 


n 


ADDRESS. 


NOTE=  No'^^^nitl''^i^?^^-^I^^*='^^^^^<^"«^85k«J  for. 


NO. 


_  date: 


CARD  NO. 


NO. 


NAME 


CARD    NO. 
-DATE 


CLOCK  CARD 


5TA.  NO. 
CHARGE 


DtPT 


OK. 


TiMtKEEPEC 


APPROVED. 


CASHIER 


DEQULAR  TIME 


EXTRA  TIME. 


Piece-work 


TOTAL 


AMOUNT 


LESS  ADVANCES 


IN 


MON. 


TUE. 


OUT 
IN 


OUT 


NET  PAY 


WED 


< 


THUR. 


fRi. 


SAT. 


SUN 


TOTAL 


CK 


Form  75.    Pay  Check  and  Time  Card  (Second  Method) 


FORMS 

ORGANIZATION    CHART;   DISTRIBUTION 
AND   ANALYSIS   SHEETS 

(Forms  referred  to  in  Chapter  XII) 


i 

W.    1  '< 


422       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


I  <^ 


^ 1; 


tfn 


o 


9^ 

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DISTRIBUTION   AND   ANALYSIS    SHEETS 


423 


424 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


DISTRIBUTION    AND    ANALYSIS    SHEETS 


425 


B 

1 

— 1 '' 1 

DEPARTMENT 

LABOC-1 

= 

EXPENSE          Dtp 

CLASsincAnoN  nc 

tJCPT  HEAD5 

aroecMEN 

CLERKS 

MPa 

TPUCKING 

, 

1.1 

1.2 

13 

1.4 

J 

A 

BMINlSTRATIVt   Q  ■ 

31    Cxecuti/e 

J 

D2  General  Manager 

J 

}3  Suoerin+erdent           | 

J 

^^^^           Total                                        II 

J 

^1 

u  ■ 

Si 

1  U  ' 

11   Treaaurer 

J 

r2  Distribution 

_J 

1 

^  ArrnuNTiNi] 

t 

SI 

13  Collections 

J 

U  Billing. 

j 

15   Rov-roll 

' 

16  Bookkcepino 

<.                       Total                               1 





5 

^                         2 
J  STENOGRAPHIC 

21    TypewrttinQ 

_ 

2?    Filinq 

23   Moilinq 

}^                           Total                                   1 



3 
Z 

*                  3 

U       5CU.INQ 

31    Secretary 

32    Advertisina 

33  Sale* 

34  Branch  Offices 

t                          Tc 

rtal 

__ 

ORDERS      "^ 

41    Uni+Onjcrs 

42  F^rts  tRtpairs 

_ 

total 

, 

E= 



Grand  Total 

r- 



•J 

5 

z 

Ha 
1- 

PURCHASING    c 
AND          -' 

51   Purchesinq 

52  Receiving 

_| 

53  (general  Stores 

_J 

Tc 

Ttal 

J 

yj     RACKING       c 
>          ANO           ° 

1^  ^"^ Sijeof  Full  page- 17' lOiinchea 

62  Finished  Strprt'        .   i.   .     »     / .    r^  l 

3 

^  St>ippinq                —m 

etrnair  or  i^rr-nana 

Jagt 

-J 

~i 

r      SHIPHNq     1—; 

atal 

1 

11 

g  PRODUCTION    Y 
Z        OtPT. 

71  Orders  8.  Schedules 

~i 

7Z  P^rminq 

J 

73  Tlmekeepnq 

ii 

Ti-  Semi-rinished  Sftonss 

J 

Z                          1< 

>tal 

J 

ENQINCEWNG    g 
AND 

81   Experimental 

J 

62  Tool  Room 

"A 

&3  Plant  Service 

j 

»\ANI  JtKVK.L' — '^— ' ■ 

Total 

_ 

Grand  Total 





2 

PROOUCnVE     9 
OtPARTMErfTS 

91  Tirame 

, 

92  CnemehnQ 

_ 

93  Automatic 

_ 

94  k/lachine 

96  Platinq&Mrshinq 



^_ 

96  Hordeninq 

-1 

97  Wheel 

If 

qg  AssemWinq  Bicycles 

4 

99  AssemblinaliMonrycled 

^ 

T 

otal 



Grand  Total  Manufactunnq 

1 





g                        Qrand  Total  NonProdoctivc 

II 





_, 

1      1     Summary  "fotel  Oxrimercial  &  M^. 

1 

h- 

.T— 

r=^ 

^ 

E 

^ 

For  Form  78,  see  page  423. 


1 

FAaORY 

1                                              MATERIALS  -  2 

II 

TOTAL 

y.. 

SHIPPING 
SUPPLIES 

OPERATING 
SUPPLIES 

MBCEL 
EQUIPMENT 

FUELS  & 
LUBWCANtS 

GENERAL 

TOTAL 

1       1 

2S 

2.2 

23 

ZA 

2.5 

2 



1 



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for  Distribution  (left-hand  page) 


^26       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


f 


OVERHEAD 

, r^ r-i 1 

EXPENSE  -  3 

MOKTMLY 
OEPRtOATlON 

MOTHTHLY 
INSURANCE 

MONTHLY 
RENT 

CUECTPIC 
CURRENT 

TAXES 

fREIGKTAND 
EXPRESS 

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I        1 


DISTRIBUTION    AND    ANALYSIS    SHEETS 


427 


Month  Ending 

_ 

GRAND 

1    DIRECT 
LABOR 

% 

REDISTRIBUTIONS                    llH 

i 

J       TOTAL 

TOTAL 

PRORATED 
OVERHEAD 

FULL 
OVERHEAD 

V, 

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FORMS 

COMMERCIAL   ACCOUNTING 

(Forms  referred  to  in  Chapter  XIII) 


432       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


FORMS— COMMERCIAL    ACCOUNTING 


433 


PURCHASE  VOUCHER 


NOL 


NAME 


AOORCSS 


OATTS 


AMOUKT) 


otDucnoNs 


owts 


AMOUNTS 


OCTucnoNS 


5i3C  of  form- 5«8  inches   I 
ORIGINAL-  Printed  on  white  paper  f 


ACCOUNT  NQ 


OKTC  ISSUED 


ACCCXJNT  0»5rWBimON 


AcNoi   AccountTitles      Amounts 


I  certHy  that  the  above  occounf  is  comcct,  end  that  the  amount  is  wuched 

far  by  invoices  regularly  appn^ed  ty  the  outtiorijed  persons 

nPPBwEO 


DoteF^id 


Check  No, 


ACOOIKTAWT 


CONTTiOU-Cg 


B0GEP5  MOTOR  W0RK5 

BRIDGEPORT.  CONN. 


Remittance  Slip  of 
PurchoscVbudTer 

Na 


NAME 


ADDRESS 


O&TES 


AMC3UNTS 


DEDUCTIONS 


WTCS 


AMOUNTS 


DdXCTXJNS 


DUR.ICATE  of  fbnn  shofwn  abac 
FVinted  on  yelkxv  paper 


CKcl 


Dear5«-:  

WeendooecxjrdieckinpBymentofabo^titems.  No  receipt  c*tier  ttian 

ttie  endorsement  of  chock  is  required.  ^^ 

K"  fbr  any  reason  ^fouarrx^saJe^(iifdxaiiipeaf<€d^t^^i^nMwm 

fuHgplar«^ioaDbtwti«cl»ck>»faacoT>»lr>gg<lanBwrth*^ 


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ROGERS  MOTOR  WORK^ 

eRtOGCPORT.  CONN. 


MONTH  OF 

VOUCHER  TICKLER 

OKte                                  1 

VOUCHCR  Na 

AMOUNT 

txiAWN  IN  rAvaa  or 

CHECK  NCX 

1 

5i»c  of  fbnnn-4«6  incheA 

Printed  on  white  card.       | 



Form  82.    Voucher  Tickler 


Form  81.    Purchase  Voucher 


434 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


FORMS-COMMERCIAL    ACCOUNTING 


435 


I 


CHARGE VOUCHER 


NO. 


Name 
Address 


CATC 


EXPtANA"nON 


AMOUKT 


AccoufrtNa 
Date  Issued 


oismnBunoN 


HCtfTNO    AaOUKT  TnUES  AMOUNT 


Sije  of  rbrm  -  5  »  8  Inches  I 


Ori^nal-PHnted  in  red -wfilte  paper] 


OEDUCTtO  raOM  WRCHASt 
VOUCHER  Na 


DATE  or  AOJUSTMtNT 


APPROVED 


COMPTBOLLtR 


CHARGE  VOUCHER 


NQ 


Name 
Address 


DATE. 


EXPLANATION 


AMOUMT 


Oup^lcs^c  of  rbrm  shown  ab 
Printed  in  rrd  on  yellow  paper 


Dear  5ir.- 

Vfe  beg  Id  advise  ttiat  we  have  changed  jour  account  as  above 
and  have  deducted  same  m  settlement  (f 
Very  truly  yours. 
ROGERS  MOTOR  WORKSi 

CRiOQCPORT,    CXJNH 


Form  83,    Charge  Voucher 


1 — r 


I  M  " 


o 


00 


1   r 


436       UNIFIED  ACCOUNTING    FOR    INDUSTRIALS 


Co 


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FORMS-COMMERCIAL    ACCOUNTING 


437 


O 


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438      UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


N? 


0        Petty  Cosh  Voucher 

Ledger  Account  Date 


fbidtD 


On  Account  <^ 


Amount 


«        •» 


•»  V 


n  1*  n 


n  n 


Postage 


Signed 


Approved 


Form  87.    Petty  Cash  Voucher 


i 


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FORMS-COMMERCIAL    ACCOUNTING 


ll 


I 


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439 


■ 

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440       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


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FORMS— COMMERCIAL    ACCOUNTING 


441 


JOURNAL  VOUCHER 

DATE 


J.V. 
Na 


AUTHOfilTY 


ACCOUNT 


DCDJT 
CRtDiT 


LEDGER 


DEBIT 


CREDIT 


Journal  fotio 


Tofals 


J 


Form  go.    Journal  Voucher 


442       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Co 

s 


H 


FORMS 

CHART    OF    CONTROLLING    ACCOUNTS 
(Form  referred  to  in  Chapters  XIV  and  XV) 


\i 


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444 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


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FORMS 


INVENTORY   RECORDS 


(Forms  referred  to  in  Chapter  XVI) 


446 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Adn^I — 5WLS1HLaCUN0UM«tQM317UWCX> 
0»V\.l    SHIAVHMOlSBMiSnWSjauaMiaiON 


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INVENTORY    RECORDS 


447 


EQUIPMENT  RECORD 


Description  of  Item. 


Made&y 


Inventory  Tag  No  — 

Marif  V-i  Serial  No  _ 

^.^_  Fbrchase  Orrkr  fio. 

.  Date  of  Invoice Date  Rec'd.  - 


floor  Space- 
trection  Date . 


.  VfeigW lbs    Speed  Chart  No.. 


.HP. 


LXATION 


OROCRNO 


DftTt 
WSTAUfD 


njROPER, 


M.L.PUlirY 


5PEE00fM.l 


STANDARD  EQUIPMENT 


■    5i jc  of  fbrtn  -  5  "  8  inches 
Printed  on  White  Card. 


REMARKS: 


PURCHASE  COST 

REPAIR  COST 

- 

DATE 

AMOUNT 

DATE 

AMOUNT 

Invoice  rncc  - 

rreignrLriargfei7_ — 

Total  Cost 

1,1 

ADDITIONAL  VALUES 



OCOO? 

OVTE 

COST 

ORoec 

CATC 

COST 





1  »»verse  side  of  abcrv«e  form.  | 

1 

MANUFACTURING   COST 

Remarks  •• 

4 

nvrriifMl                                              

'""""B*""* —  ■ ■" 

Tf*^) 

Form  94-    Equipment  Record 


Form  95 
STORES     LEDGER 

With  ready  reference  stores  classifi- 
cation, indexed,  tabulated,  and  contain- 
ing a  short  description  of  the  various 
classes. 

Note :  Nothing  is  more  necessary  in  the  revamping  or  systematizing 
of  a  business  than  a  complete  classification  of  general  stores;  to  open 
up  a  "Stores  Ledger"  only  partially  classified  means  a  continual  an- 
noyance, delay,  and  rearranging  of  ledger  sheets  to  introduce  new 
classifications  from  time  to  time.  The  usual  stores  classification,  as 
given  in  Chapter  IV,  is  simply  indicative,  leaving  it  for  the  stores 
recorder  or  stores  keeper  to  work  out  the  full  classification  to  suit 
himself. 

The  stores  ledger  presented  herewith  gives  a  complete  classifica- 
tion of  stores  for  factories,  alphabetically  arranged  and  captioned. 
Each  class  is  numbered  with  a  Dewey  decimal  number  and  is  ready 
for  accounting  and  statistical  work,  and  from  this  classification  the 
manufacturer  can  select  such  names  as  fit  his  particular  business  and 
thus  have  his  ledgers  properly  opened  at  the  very  start. 


I 


\ 


450      UNIFIED    ACCOUNTIxNG    FOR    INDUSTRIALS 

Tabulation  Showing  Stores  Classification  and 

Class  Number 

(Key  number  not  shown  here,  is  placed  before  the  dash.) 


■1.0  Abrasives 

-1.1  Books 

-1.2  Chemicals — Drugs 

-1.3  Compounds 

-1.4  Cordage 

-1.5  Equipment 

-1.6  Fabric 

-1.7  Fibre 

4.8  Fittings 

-1.9  Fuel 


-2.0  Leather 

-2.1  Lubricants 

-2.2  Lumber 

-2.3  Machinery 

-2.4  Metals 

-2.5  Paint 

-2.6  Paper 

-2.7  Stationery 

-2.8  Tools — Hand,  Small 

-2.9 


STORES  CLASSIFICATION 

-1.0 
Abrasives 

In   this   classification    arc    to   be   included   all    cutting   or 
grinding  supplies  and  wheels  used  for  this  purpose. 


Carborundum 

paper 

powder 

stone 

wheels 
Crocus  cloth 
Emery 


cloth 

paper 

powder 

wheels 
Garnet,  paper 
Glass,  ground 
Paper,  sand 


Pumice 

powder 

stone 
Sand,  sandblast 
Soap,  grit 
Stone,  sand 
Wheels,  grinding 


STORES  LEDGER 


-1.1 


45 1 


Books 

In  this  classification  are  included  all  books  of  any  kind, 
whether   catalogues,   periodicals,   accounting   or   other   books. 


Accounting  books 
Atlases 
Blank  books 
Copy  books 


Directories 
Guide  books 
Memorandum  books 
Order  books 


Scrap  books 
Stenographers'   books 


-1.2 
Chemicals — Drugs 

In  this  classification  are  included  all  chemicals  for  labo- 
ratory and  shop  use,  and  also  all  drugs,  instruments,  etc.,  for 
the  hospital. 


Arnica,  tincture 
Aspirin 
Bags,  ice 
Bandages 

gauze 

muslin 

roller 

rubber 
Basins,  dressing 
Belladonna 
Benzene,  purified 
Benzoin,  tincture 
Bismuth 
Bottles 

acid 

magnesia 
Brimstone 
Calcium  chloride 
Calomel 
Catgut  ligature 
Caustic 


Chemicals— fire  extin- 
guisher 
Chloral  hydrate 
Chloroform 
Cocaine 

Condensers,  laboratory 
Cotton 

Cotton,  absorbent 
Creosote 
Digitalis 
Droppers 
Ether 

Ethyl  morphine 
Exterminator 
Funnels,  glass 
Gauze, 

absorbent 

antiseptic 

Iodoform 
Gloves,  rubber 
Graduates 


Instruments 

Iodide 

Lime 

Linaments 

Needles,  hyperdermic 

Nitrate 

Oils 

ammonia 

castor 

linseed 
Ointments 
Plaster,  adhesive 
Plungers,  syringe 
Potash 
Saltpeter 
Salts,  soldering 
Sheeting,  rubber 
Soda 
Spatulas 


\i 


45 


.       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


-1.3 


Compounds 

In  this  classification  are  included  all  boiler,  cement,  wash- 
ing and  other  compounds  (also  the  composition  used  for 
printing  rollers),  whether  used  in  the  shops  or  by  the  office. 


Cement 

belt 

furnace 

high   temperature 

liquid 

pipe  covering 

Portland 

roofing 

rubber 

steam  pipe 

water  pipe 
Cleaner 

boiler 


floor 

hand 

squeegee 

tube 
Composition,  roller 
Compounds 

acid  proof 

alkali  proof 

flexible 

molasses 

polishing 

scouring 

welding 


Gelatin,  photo 
Glue 

Hectograph 
Polish 

furniture 

metal 

stone,  rotten 

Soap 

compound 

scouring 

soft 


-1.4 
Cordage 

In  this  classification   are   included  all 


cordage. 

oakum,  jute,  waste,  etc.,  etc 

Caulking 

tarred 

jute 

window 

oakum 

Lacing 

Cord 

cord 

bell 

twine 

cotton 

Oakum 

flax 

caulking 

flexible 

navy 

halyard 

picked 

hemp 

Rope 

jute 

cotton 

lacing 

flax 

marlin 

hemp 

picture 

manila 

•^ash 

Twine 

twines,   cords   and 

broom 

cotton 

flax 

gray 

hemp 

jute 

lacing 

linen 

sail 

seine 

tag  strings 

unoiled 
Waste 

cotton 

wool 


STORES    LEDGER  453 

-1.5 
Equipment — Factory,  Office 

In  this  classification  are  included  all  supplies  and  materials 
such  as  furniture  and  articles  of  daily  use  which  are  not  tools 
or  fittings. 


Baseboards,  typewriter 

Cots 

change  making 

Baskets 

Cups 

comptometer 

desk 

Cushions 

computing 

office 

chair 

computing    and 

rattan 

rubber 

typewriter 

waste 

typewriter 

duplicating 

Bedsteads 

Cuspidors 

envelope  opening 

Bookcases 

Desks 

envelope  closing 

revolving 

flat  top 

eyelet 

sectional 

flat  (extra  large) 

mimeograph 

Bottles,  water 

roll-top 

neostyle 

Boxes 

table 

numbering 

storage 

typewriter 

paper  fastening 

transfer 

Dippers 

pencil   sharpening 

Brushes,  hair 

Dusters 

perforating 

Cabinets 

feather 

roller  copying 

book 

wall 

stamping  (postage) 

file 

Files,  document 

typewriters 

sample 

Filters,  water 

watches,  stop 

stationery 

Glasses 

Matches 

steel 

drinking 

Microscope 

Cameras 

magnifying 

Racks 

Carts,  push 

microscopic 

hat 

Chairs 

Hangers 

towel 

bent  wood 

Holders,  telephone 

umbrella 

revolving,  cushion 

Ice 

Rests,  arm 

saddle  seat 

Ladders 

Rollers 

step-ladder 

Machines 

chart 

typewriter 

adding 

map 

Clocks  (not  time) 

addressograph 

window-shade 

Containers 

billing 

Sweepers,  carpet 

\l 


454 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


-1.6 


Fabric 

In  this  classification  are  included  all  woven  and  other 
fabrics  such  as  bagging,  netting,  canvas,  rubber,  leatherette, 
etc.,  etc. 


Aprons 

round 

fabric 

laboratory 

Blankets 

rubber 

rubber 

Bunting 

Mats 

shop 

Burlap 

cocoa 

storm  (auto) 

Carpet 

rubber 

Bagging 

Cloth 

Matting 

Bagging,  jute 

awning 

cocoa 

Bags 

copying 

rubber 

burlap 

scrub 

Roofing 

canvas 

wiping 

paper 

coffee 

Counterpanes 

rubberoid 

coin 

Covers 

Rubber 

duck 

desk 

Sacks 

Baskets,  leatheroid 

typewriter 

Shades,  window 

Bedspreads 

Felt 

Strips,  weather 

Belting 

Flags 

Towels,  cloth 

cotton 

Hose 

-1.7 

Fibre 

In  this  classification  are  included  everything  in  the  nature 
of  fire-resisting  materials  and  supplies,  such  as  asbestos,  steam 
packing,  boiler  packing,  etc. 


Asbestos 

paper 

wick-packing 

fireboard 

pipe-covering 

wood 

insulating 

sheet-packing 

wool 

millboard 

tape 

STORES  LEDGER 


-L8 


455 


Fittings 

In  this  classification  are  included  all  fittings,  such  as  auto- 
mobile, plumbing,  steam,  electrical;  unions,  couplings,  nails, 
brads,  pots,  etc.;  that  is  to  say,  anything  and  everything  used 
in  the  plant  which  does  not  properly  come  under  tools  or 
equipment. 


Annunciators 

bronze 

Clamps 

Arrestors,  lightning 

composition 

basin 

Basins,  wash 

porcelain 

beaker 

Baskets,  toting 

steel 

beam 

Bells 

Buttons 

bolt 

Blades,  fan 

door 

cabinet 

Bolts 

push 

condenser 

expansion 

Cable 

iron 

machine 

electric 

laboratory 

track 

elevator 

pinchcock 

Bone,  black 

iron 

steel 

Bowls 

steel 

wood 

closet 

Cans 

Clay,  fire 

urinal 

ash 

Clips,  shade  roller 

Boxes 

garbage 

Clusters,  electric 

conduit 

G  I 

Coils 

tote 

oil 

fan 

Braces 

paint 

resistance 

Brackets 

sprinkling 

Condensers 

Brick,  fire 

steel 

glass 

Buckets 

tin 

metal 

fire 

Carbon 

Conduit 

galvanized 

electric 

flexible 

paint 

filament 

rigid 

Bulbs 

Card  holders 

underground 

atomizer 

brass 

Connectors,  hood 

electric 

iron 

Coolers,  water 

horn 

Catches 

Copper 

Burners 

Centers,  push  button 

bronze 

gas 

Chains 

cups 

incandescent 

jack 

funnels 

Burnishers,  metal 

sash 

gauze 

Bushings 

transom 

gutter 

Babbitt 

weight 

rivets 

brass 

Checks,  door 

rods 

4S6 


UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Copper — continued 

towel 

rake 

solder 

'•      paper 

scoop 

tacks 

Flanges 

shovel 

terminal 

Funnels 

sledge 

valve 

enamel 

socket 

washers 

filtering 

spade 

wire 

glass 

tub 

Couplings 

porcelain 

Hangers 

elbow 

tin 

door 

hose 

rubber 

pipe 

round 

valve 

Hinges 

Crucibles 

Gaskets 

brass 

Cups,  oil 

glass 

iron 

Cut-outs 

rubber 

Hods 

Discs,  valve 

Glass 

Holders 

Drawers,   door 

condensers 

crucible 

Elbows 

gages 

door 

Electrodes,  arc 

globes 

shade 

Excelsior 

plate 

toilet  paper 

Extinguishers 

reflector 

twine 

Eyelets 

shades 

Hooks 

Eyes 

tubing 

awning 

screw 

window 

bale 

steel 

wired 

belt 

Fans 

Gutter 

ceiling 

ceiling 

copper 

picture 

oscillating 

galvanized 

pipe 

wall 

iron 

screw 

Fasteners 

wrought 

spout 

belt 

Handles 

Hose 

casement 

adze 

air 

clamp 

awl 

rubber 

clip 

axe 

steam 

sash 

broom 

Insulators 

woodwork 

chest 

Iron 

Figures — Letters 

chisel 

filings 

Fittings 

drawer 

palings 

conduit 

file 

retort    stand 

electric  conduit 

fork 

steps 

flexible 

hammer 

Irons,  corner 

hose 

hatchet 

Isinglass 

metal 

hoe 

Jambs,  door 

pipe 

mop 

Jars 

Fixtures 

pick 

acid 

STORES    LEDGER 


457 


Juts— continued 

drop 

Rings 

battery 

plumbing 

insulating 

flint 

Nuts 

key 

glass  covered 

blank 

screw 

glass  stoppered 

bolt 

Rivets 

Joints,  insulating 

cold 

Rods 

Knobs 

hexagon 

brass 

mortice 

machine  screw 

copper 

rim 

square 

iron 

shutter 

tapped 

steel 

split-insulator 

thumb 

Rollers 

Lamps 

Pins 

iron 

arc 

cotter 

steel 

electric 

steel 

Roofing 

hand 

taper 

pro- slate 

headlight 

Pipe 

tin-plate 

oil 

iron 

Rosettes 

repair 

lead 

Scales 

spirit 

terra-cotta 

counter 

tail-light 

tin 

double  beam 

Lanterns 

vitrified 

platform 

conductor's 

Plugs 

track 

dark 

basin 

warehouse 

hand 

fuse 

Scoops 

switch 

Plumb-bobs 

Screens 

Lifts 

iron 

Screws 

sash 

brass 

closet 

transom 

Poles 

jack 

Locks 

steel 

Seals,  car,  lead 

cupboard 

window 

Seats,  closet 

desk 

wood 

Shades,  electric  light 

door 

Pots,  glue 

Shields 

drawer 

Racks 

aluminum 

night 

test  tube 

expansion 

pad 

towel 

eye 

Loops,  chandelier 

Radiators 

finger 

Marble 

auto 

Shut-offs 

Nails 

heating 

Snaps,  chain 

Needles 

Railings,   iron 

Sockets,  electric 

packing 

Rails 

Spikes,  railroad 

sack 

iron  fence 

Spoons,  weighing 

sail 

steel  railroad 

Spouting,  pipe 

Netting,  wire 

Renewals,  battery 

Sprays 

Nipples 

Rests,  shelf 

disinfectant 

\\ 


ni 


■ 


458       UNIFIED 

ACCOUxNTlNG    FOR 

INDUSTRIALS 

Sprays — continued 

floor 

Tweezers 

hose 

wall 

Type,  printing 

Springs 

Switches 

Unions 

door 

battery 

Valves 

check 

entrance 

air 

fan 

knife 

flushing 

Sprinklers 

panel 

pump 

fire 

pendent 

radiator 

lawn 

railroad 

steam 

Squeegees 

snap 

water 

floor 

Swivels 

Washers 

window 

Tacks 

brass 

Stakes 

carpet 

copper 

Staples,  insulated 

upholstery 

iron 

Stays,  chain 

wiring 

lead 

Stencils 

Tanks,  water 

steel 

Stone 

Terminals,  cable 

Wax 

ballast 

Terra-cotta 

Weights 

broken 

Tiles,  porcelain 

sash 

grind 

Toggles 

scale 

sharpening 

Tops,  auto 

Wheels,  pipe  cutter 

soap 

Torches 

Wire 

Stops,  door 

electric 

annunciator 

Strainers,  paint 

gasoline 

black 

Studs 

hand 

copper 

belt 

Trays,  tote 

iron 

fixture 

Tubing 

steel 

insulating 

Tubs 

telephone 

Sweeps 

Turnbuckles 

Wringers,  mop 

-1.9 
Fuel 

In  this  classification  are  included  any  and  every  material, 
substance  or  liquid  used  to  feed  a  flame  for  the  purpose  of 
producing  steam,  heat,  or  light. 


Benzine 

anthracite 

Naphtha 

Candles 

bituminous 

Oils 

Charcoal 

Coke 

Paraffine 

Coal 

Gasoline 

Wood 

STORES    LEDGER 


459 


-2.0 
Leather 

In  this  classification  are  included  leather  belting,  lacing, 
hides,  chamois,  fur  robes,  or  fur-lined  coats,  such  as  those 
worn  by  chauffeurs. 


Bags 

document 

hand 

money 

Belting 


Chamois 

Coats,  fur,  chauffeurs' 

Gaskets 

Hides 

Laces 


Lacing 

Rawhide 

Robes,  fur,  automobile 

Straps,  gun 

Washers 


-2.1 
Lubricants 


In  this  classification  are  included  all  oils,  rrreases  or  sub- 
stances of  any  kind  used  for  lubricating  machinery. 
Graphite  graphite                            Havoline 
Grease  Oil                                        machine 
auto  auto                               Tallow 
axle  cylinder                        Vaseline 
cup  engine 


i 


-2.2 
Lumber 


In  this  classification  are  included  all  wood  of  any  descrip- 
tion, whether  in  the  rough  or  dressed  state,  and  also  boxes  used 
for  packing. 


Arms,  cross 

Gum 

Poplar 

Ash 

Hemlock 

Posts 

Backing 

Hickory 

Scantling 

Basswood 

Maple 

Shelving 

Boxes,  packing 

Millwork 

Siding 

Capping 

Moulding 

Slats 

Cedar 

Oak 

Spruce 

Chestnut 

Paling 

Stepping 

Cypress 

Pine 

Strips,  weather 

Flooring 

Poles 

Walnut 

f^  t 


460 


UNIFIED    ACCOUNTING    FOR    IXDUSTRIALS 


-2.3 


Machinery 

In  this  classification  are  included  all  machines  and  ma- 
chinery erected  in  the  shops  (including  time  clocks)  such  as 
burring,  broaching,  chambering  and  miUing  machines. 


Arrester,  dust 

horizontal 

double  stroke 

Assembling,  grip 

sensitive 

upsetting 

Automobiles 

upright 

Joining 

delivery,  light 

vertical 

Jointing,  saber  handle 

touring 

Driving,  bolt  nut 

Key  seater 

truck,  electric 

Engraving 

Lathes 

Backing-oflF 

Exhaust  fan 

barrel  turning 

Balancing-knife 

Exhauster 

bench 

Barrel  bedding 

Fans 

cone  head 

Beading 

double 

engine 

Belt 

single 

double 

benches 

Filing 

geared 

scarfing 

Folding 

quick-change 

lacing 

Forming 

single 

Benches,  saw 

Gaging 

speed 

Boring 

Grinders 

tool  makers 

saber  handle 

automatic 

turret 

spindle 

barrel  drill 

variety 

vertical 

form  cutter 

wood 

Brakefolder 

hemming 

Marking 

Broaching 

open  side 

Mill 

Burring 

plain 

boring 

Calibrating 

precision 

charcoal 

Centering,  gun  stock 

rivet 

turning 

Chambering,  barrel 

special 

vertical 

Coilers 

tool 

Millers 

Compressors 

vertical 

adjustable 

Cutters,  bolt 

wet  tool 

automatic 

Cutting-ofT 

Grooving,  graining 

bench 

Dental  engines 

Hammers 

cam 

Dies  sinkers 

drop 

external  thread 

Drilling,  hand  guard 

cushion 

hand 

Drills 

steam 

internal  thread 

automatic 

strap 

plain 

barrel 

Heading 

semi-automatic 

high  speed 

single  stroke 

universal 

STORES    LEDGER 


461 


Millers — continued 

machines 

Shears 

vertical 

traps 

alligator 

Nut  Screwing 

Sawing 

angle 

Planers,  4  roll 

band 

bar 

Planing,  jointing 

rip 

bench 

Polishers,  automatic 

scroll 

combination 

Polishing 

wood 

lever 

frames 

Saws 

power 

heads 

equalizing 

special 

Presses 

facing 

squaring 

arbor 

hack 

Slotting 

bench 

high  speed 

automatic 

embossing 

hot 

die 

hydraulic 

wood-trimming 

hand 

knuckle 

Screw  machines 

Splinters,  receiver 

hot  trimming 

automatic 

Spotting 

pillar 

automatic  cut-off 

Spring 

plain 

automatic  turret 

setting 

power 

hand 

winding 

punch 

plain 

Stake  holders 

reducing 

slotters 

Stamping 

special 

wire  feed 

Straighteners 

Profilers 

Separators 

Striking 

automatic 

oil 

Swagging,  hot 

horizontal 

sterling 

Tapping 

spindle 

turbine 

multiple  spindle 

wood 

waste 

vertical 

Punching 

Shapers 

Tenoner,  standard 

Reamers 

crank 

Testing,  vertical 

Rifling 

horizontal 

Thread,  rolling 

Riveting 

universal 

Tilting 

rotary 

vertical 

Turning,  wood 

spindle 

wood 

Welding 

vertical 

Shaping 

acetylene 

vibrating 

butt 

automatic 

Rolling 

crank 

electric 

Sand-blast 

vertical 

spor 

barrels 

Shavers,  bench 

Wheel  washing 

cabinets 

Shaving 

Wiring,  turning 

[ 


I  ii 


] 


462       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


-2.4 


Metals 

In  this  classification  are  included  all  bar,  cast,  sheet  and 
pig  metals  of  any  kind  whatsoever  which  are  not  actually  made 
up  into  definitely  named  articles. 


Aluminum 

pig 

Steel 

bar 

sheet 

component 

sheet 

Lead 

high  speed 

Babbitt,  bar 

bar 

high  speed  tool 

Brass 

cake 

machine  steel 

bar 

pig 

Tin 

sheet 

sheet 

block 

Bronze 

Magnolia 

pig 

bar 

Manganese 

sheet 

block 

Sheathing 

Zinc 

Iron 

Sheeting 

bar 

bar 

Solder 

sheet 

cast 

Spelter 

-2.5 


Paint 


In   this   classification   are   included   all   paints,   varnishes, 
shellac,  rosin,  tar  and  other  supplies  of  like  nature. 


Drier 

Lampblack 

Preservative 

japan 

Lead 

Putty 

paint 

sugar 

Resin 

Dry 

white 

Rosin 

Enamel 

red 

Shellac 

Filler 

Lime 

Stain 

Finish,  wall 

Mixed 

Tar 

Gum,  veneering 

Pitch 

Turpentine 

Japan 

Plaster  of  Paris 

Whitewash                            1 

STORES  LEDGER 


-2.6 


463 


Paper 

In  this  classification  are  included  all  bulk  paper,  cardboard, 
made  up  pasteboard  boxes,  etc.,  etc. 


Bags 

oil 

colored 

mailing 

press 

manila 

mails 

straw 

white 

Board 

tag 

Paper 

beaver 

Boxes 

wrapping 

binders 

cardboard 

writing    (in    bulk, 

bristol 

pasteboard 

uncut) 

illustrating 

Cardboard 

-2.7 

Stationery 

In  this  classification  are  included  all  cut  paper,  letter-heads, 
envelopes,  forms   (printed  and  blank),  pens,  pencils,  etc. 


I 


Bands,  rubber 

prepared 

steel 

Binding  devices 

Charcoal,  artists' 

Films,  pack 

loose-leaf 

Clips 

Folders,  paper 

passe-partout 

board 

Frames 

Brushes 

brass 

label 

artists* 

paper 

map 

copy 

spring 

printing 

draftsmen's 

steel 

Glasses,  drinking 

mucilage 

photo 

Gum  arable 

paste 

Compasses 

Ink 

Calendars 

beam 

colored 

desk 

pen 

copying 

wall 

pencil 

drawing 

Cards 

Cups,  paint 

duplicating 

guide 

Cushions,  pin 

fountain  pen 

index 

Cutters,  paper 

indelible 

manila 

Edges,  straight 

marking 

pressboard 

Envelopes 

numbering  machine 

Chalk 

Eradicator 

stamp  pad 

crayons 

Erasers 

stencil 

French 

rubber 

Inkstands 

^1™f' 


464       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


' 


Instruments,  drawing 
Knives 
office 

pencil  sharpening 
Labels,  gummed 
Magnets 
Mallets 
Mucilage 
Pads 
chair 
desk 

numbering  machine 
stamp 
typewriter 
Paper 
backing 

billing  machine 
binding 
black  print 
blue  print 
bond 
bromide 
carbon 

computing  machine 
detail  drawing 
detail  manila 
developing 
drawing 
filter 
fly 

gummed 
impression 
India 
ledger 

machine  finish 
manila 
map 


note 
off-set 
onion  skin 
paraffine 
photostate 
photographic 
platinum 
process 
sketching 
stencil 
tissue 
typewriter 
Paste 
Pencils 
artists' 
automatic 
camel's  hair 
carpenter 
colored 
lead 
slate 
Pens 
bow 
drafting 
fountain 
lettering 
ruling 
steel 

stylographic 
swivel  curve 
Pins 
Plates 

photographic 
printing 
Pounces 
Racks 
pen 


stamp 
Ribbons 

adding  machine 

computing  machine 

dating  stamp 

duplicating  machine 

typewriter 
Rulers         *' 

drawing 

parallel 

patent 

shde 
Scales 

automatic 

coin 

drafting 
letter 
Scissors 
Silk,  oiled 
Sponges 
Tabs,  index 
Tacks 
push 
thumb 
Tags 
key 

merchandise 

shipping 
Tank,  developing 
Tape 

adhesive 

gummed 

linen 
Thermometers 
Trays,  photo 
Triangles 
Wax,  sealing 


-2.8 

Tools— Small  and  Hand 

In  this  classification  are  included  all  small  and  hand  tools 
of  any  kind  whatsoever. 


Adzes 
Anvils 
Augers 
Awls 

book-makers' 
ice 
Axes 
Bellows 
Bevels 
Bits 
auger 
expansion 
plane 

screw  driver 
twist  drill 
Blades 
awl 
saw 
Braces 
corner 
ratchet 
Brushes 
cleaning 
dusting 
kalsomine 
machinists* 
marking 
paint 
radiator 
sash  tool 
scrub 
stencil 
stipplers 
toilet 
varnish 
whitewash 
Calipers 
Caulks 
Chisels 
cold 
hot 
Clamps 

Combs,  graining 
Countersinks 


STORES  LEDGER 

metal 
wood 
Couplings 
Cups 
force 
plumber 
Cutters 
glass 
pipe 
Dies 

pipe  cutter 
stamp 
stencil 
stock 
Dividers 
bow 

hair-spring 
proportional 
Drills 

auto  boring 
breast 
carbon  steel 
hand 

high  speed 
metal 
miller's 
machine 
Stanley's 
shank 
star 
taper 
twist 

wood,  taper 
wood,  square 
Files 
bastard 
flat 

one-half  round 
rasp 
round 
triangular 
Gages 
Hammers 
blacksmith 


465 


bookbinder's 
bricklayer's 
claw 

engineer's 
machinist's 
planishing 
riveting 
sledge 
tack 
tinner's 
upholstery- 
Hones 
oil 

water 
Instruments,     preci- 
sion gages,  etc. 
Irons,  soldering 
Jacks 

hydraulic 
lifting 
wheels 
Knives 
drawing 
hacking 
putty 

shoemaker's 
Levels 

carpenter's 

hand 
Mattocks 
Microscopes 
Mops 
Mortars 

glass 

porcelain 
Moulds 
Mowers,  lawn 
Oilers 

brass 

copper 

iron 
Picks 

concrete 

railroad 


M 


\ 


466       UNIFIED    ACCOUNTING    FOR    INDUSTRIALS 


Pincers 

tinner's 

blacksmith's 

Planes 

trimmer's 

chain 

Plungers,  screwdriver 

Shovels 

ice 

Points,  glazier's 

D  handle 

Trowels 

Pumps 

L  handle 

brick 

force 

post-hole 

cement 

section 

S  handle 

circle 

suction 

scoop 

corner 

Reamers,  hand 

snow 

garden 

Saws 

Spades 

plastering 

circular 

D  handle 

pointing 

coping 

L  handle 

Vises 

crosscut 

S  handle 

chain 

hack 

Spatulas 

hand 

hand 

Squares 

machinist's 

rip 

carpenter's 

saw 

Scrapers 

machinist's 

Wrenches 

paint 

Swedges 

hand 

wood 

Tampers 

monkey 

Shears 

concrete 

stillson 

grass 

railroad 

tap 

hedge 

Tongs 

-2.9 

This  number  section  provides  for  a  possible  future  sub- 
division of  one  of  the  now  existing  classes  should  it  be  deemed 
necessary. 


INDEX 

(Form  references  are  to  pages.) 


Accounting, 
commercial,  241-264 
industrial, 
elements  of  production  con- 
stant, 6 
standards  developed,  6 
unified,  9,  10 
purposes  of,  28 
Accounts, 
analytical, 

cost  accounting  requires,  7 
controlling,  265-315 
asset  accounts,  270,  272-281 
chart  of,  269,  270 

Forms,  444 
liability  accounts,  270,  299- 

310 
moral  effect  of,  33,  34 
nomenclature  of,  9,  10 
principles    applied    to    pro- 
duction costs,  9,  10 
profit    and    loss    accounts, 

270,  271,  310-315 
purpose  of,  267-269 
stores,  component,  98,  99 
unify  cost  and  general  ac- 
counting, 268 
payable, 
cash  disbursed,  entry,  253 
controlling  account,  301 
datings,       controlling      ac- 
count, 302 
personal,  264 
voucher  system,  243-249 

467 


receivable, 
cash  receipts,  entry,  251 
consigned,     asset     account, 

274,  275 
controlling  account,  273,  274 
past    due,    controlling    ac- 
count, 274 
suspense,     controlling     ac- 
count, 275,  276 
Advanced    expense    (Sec    "Ex- 
pense, advanced") 
Advertising  expense, 
advanced,  278 

distribution  of  selling  expense, 
263 
Allowances   (Sec  "Rebates  and 

allowances") 
Analysis  sheet,  sales,  239 

Forms,  430 
Assembling, 
production  order,  62 
material  distribution,  106 
Forms,  368 
requisitions,  103,  104 
Forms,  365 
Assets, 

accounts,  controlling,  270,  272- 

298 
current,  270 
fixed, 
repairs  chargeable  to  depre- 
ciation, 7 
inventory,  270 

classification  of,  329 
investments,  270 


! 


II 


468 


INDEX 


B 


Balance  sheet  (monthly),  27-40 
Forms,  343-347 
executive's  viewpoint,  33-36 

collections,  34 
financier's  viewpoint,  30-32 
earning  capacity,  31 
solvency  of  company,  31 
industrial  manager's,  27-40 

Forms,  342-347 
manufacturer's  viewpoint,  36 
time  of  completion,  30 
unified, 
availability  and  value,  38,  39 
Betterments,  181-183 
order  record,  233 
orders,  182,  183 
Forms,  393 
defined,  168 

distribution  of  copies,  182 
numbering  of,  182 
time  ticket  (daily),  183 

Forms,  401 
"work  in  progress,"  treatment 
of,  182.  183 
Blue  prints  (See  "Drawings  and 

tracings") 
Board, 
control  or  planning,  190 

Forms  (insert),  404 
machine,  193,  194 
Bonds, 
controlling  account,  308 
redemption  fund, 

controlling  account,  306 
treasury,  279 
Buildings, 
controlling  account,  289 
depreciation  on,  64,  290 

reserve  for,  305 
equipment, 
controlling  account,  289,  290 
depreciation  on,  64,  290 
Burden  (Sec  "Overhead") 


Calculations, 
extensions,   handling  of,   107, 
108 
Capital  stock,  307,  308 
common, 
controlling  account,  308 
treasury,  280 
preferred, 
controlling  account,  308 
treasury,  279,  280 
Card,  time  (See  "Time  card") 
Cash, 
bank  controlling  account,  272 
disbursements  (check),  entry, 

252-254 
incoming,  sheet,  250 

Forms,  436 
petty,  254-256 
controlling  account,  272, 273 
"imprest  system,"  254 
record,  254-256 
voucher,  254-256 
Cash  sheet,  incoming,  250-252 
Censorship  of  materials,  73.  74 
Charge  voucher,  247 

Forms,  434 
Charts, 
controlling  accounts,  269 

Forms,  444 
graphic,  161-164 

Forms  (insert),  389 
component  schedule,  162 

Forms.  390 
order  control,  188-189 
Forms  (insert),  404 
pay-roll,  160 
unit  schedule,  162 
Forms  (insert),  390 
organization,  223-224 

Forms,  422 
wages, 
day  work  rates  and  piece-work 
earnings,  202 


INDEX 


469 


Check, 

disbursements,  record  of,  252 
Forms,  437 
Claim  voucher,  54 

Forms,  355 
Clerks,  salaries  of, 

overhead  distribution,  227 
Clock  card  (See  "Time  card") 
Commercial  accounting  (See  "Ac- 
counting") 
Commercial    expense   distribution 
sheet,  258-264 
Forms,  442 
Commission,     expense     (selling) 

distribution,  262 
Compensation  of  employees   (See 

"Wages") 
Component   stores    (See   "Stores, 

component") 
Control, 
created  by  unified  methods  of 
accounting,  28 
Control  board,  175 

Forms  (insert),  404 
routine  of,  190 
Controlling    accounts    (See    "Ac- 
counts, controlling") 
Costs   (See  also  "Labor,"  "Over- 
head," "Production") 
flat  (See  "Costs,  production") 
primes,  67 
production,  186,  187 
accounts,  analytical,  7 
card,  236-238 

Forms,  428,  429 
commercial    transactions    not 

included,  7 
quantities  made  affecting,  14 
reduced  by  volume  output,  14 
sales  policy  effect  upon,  11 
Credits, 
expense,  commercial,  263,  264 
stores,  general,  89,  90 
Forms,  359 


Day-work, 
clock  cards,  207,  217 

Forms,  416,  419 
daily    production    time    tickets 

and  slips,  173 

Forms,  396,  399 
time  sheet  record,  213,  215,  216 

Forms,  417,  418 
Debts,  bad. 
reserve  for,  controlling  account, 

306 
Defective  repairs, 
rejection  for,  188 

Forms,  404 
time  ticket,  daily,  177,  178 

Forms,  400 
Demonstrations,  262 
Depreciation, 
accounting,  principle  same  in  all 

industrials,  6 
buildings,  290 

costs  charged  monthly  with.  32 
departmental  overhead, 

basis  of  calculation,  230,  231 
drawings  and  tracings,  65 
equipment,  building,  290 
equipment,  by  obsolescence,  6 
investments,  reserves  for,  286 
material,  by  obsolescence,  6 
monthly,  overhead  distribution, 

230,  231 
rates  of,  64,  65 
recovery  through  repair  orders, 

234 
reserves  for, 

buildings,  controlling  account, 
305 

patents,    controlling    account, 
305 

plant  repairs,  184 
Dewey  decimal  system, 
classification      of      betterment 

orders,  64,  65 


470 


INDEX 


I 


Dewey  decimal  system — continued 
classification  of  stores, 
Forms,  449 
Dies, 
depreciation  on,  65 
standardization  of,  116 
Dies,  jigs,  and  fixtures, 

controlling  account,  293,  294 
Disbursements, 
petty  cash,  254-256 
Form,  439 
Discount, 
allowed, 
expense   (commercial)   distri- 
bution sheet,  261 
earned  (cash), 
expense  (commercial)  credit, 
264 
purchase, 

cash  disbursed,  entry,  253 
sales,  cash  receipts  entry,  250 

Distributions,  219-239 
commercial  expense,  258 

Forms,  442 
factory  overhead  sheet,  224-233 

Forms,  423-426 
organization  on  required,  221 
production  cost  card,  236 

Forms,  428,  429 
record  of  production,  betterment, 

and  repair  orders,  233-236 

Forms,  423 
sales  analysis  sheet,  239 

Forms,  430 

Dividends  declared, 
controlling  account,  309,  310 

Drawings  and  tracings, 
card  index  and  record,  128,  129 

Forms,  375 
controlling  account,  297 
cost  record  covering,  128 
depreciation  on,  65 
numbering  of,  121 


Earnings, 
financier's  viewpoint  of  balance 

sheet,  31 
Efficiency, 
engineering  (See  "Engineering, 

industrial") 
factors, 

labor  stability,  22 

nature  of  product,  22 
Electrical  service, 
depreciation  on,  64 
overhead  distribution,  231 
Employees, 
absentees'  report,  203 

Forms,  411,  413 
department,  change  of,  203 

Forms,  413 
dismissed,  204-206 
Forms,  414 

monthly  record,  Forms,  415 
pay-roll  system,  206,  207 
quitting  card,  204,  205 

Forms,  414 
rate  card,  201 

Forms,  411 
rate,  change  in,  203 

Forms,  412 
record  of,  205 

Forms,  414 
resignations,  204-206 

monthly  record,  Forms,  415 
time  or  clock  card,  207,  217 

Forms,  416,  419 
time  sheet,  209,  215 

Forms,  417,  418 
Employment,  (See  also  "Labor") 
application  for,  199,  200 

Forms,  406-408 
Engineering,  industrial,  3-24 
conditions  necessitating,  3-5 
phases  of,  5,  6 
principles  of,  6,  7 
purpose  of,  5 


INDEX 


47  A 


Engineering,  industrial— cow/mM^d 

qualifications  required,  5,  6 
Entertainment, 
expense    (selling)    distribution, 
262 
Equipment,  (See  also  "Machines") 
balance  of,  16,  17 

idle  machines,  15,  17 
depreciation,  5,  290 
machine  tool, 

analyzing    and    grouping    of, 
116,  133-148 
miscellaneous, 
controlling  account,  295,  296 
overhead  distribution,  229,  230 
obsolete,  controlling  account,  307 
record,  332 
Forms,  447 
Erasures, 

errors  not  to  be  changed  by,  250 
Error  in  incoming  cash  sheet,  cor- 
rection of,  250 
Executive,  balance  sheet  as  viewed 

by,  33-36 
Expense,  (See  also  "Overhead") 
advanced, 
advertising,  278 
development  and  experimental 
work,    controlling    account, 
298 
insurance,  277 
salesmen,  278 
commercial  or  office, 
controlling  account,  312 
credits,  263,  264 
distribution  sheet,  258-261 
Forms,  442 
distribution  of,  7,  8 
clement  of  production  cost,  6 

legal, 

expense   (commercial)  distri- 
bution sheet,  260 
overhead  distribution,  230-232 

Forms,  423-426 


patents, 
expense   (commercial)   distri- 
bution sheet,  260 
percentage  based  on  net  sales, 

258 
selling,  261-263 
Express    (See   "Freight  and   ex- 
press") 


Factory     materials     (See     "Ma- 
terials") 
Factory  overhead  sheet  for  distri- 
butions. 
Forms,  423-426 
Failures,  industrial, 

causes  of,  7,  8 
Filing, 

drawing  and  tracing  index,  128 
key  card,  126 

material  receipt  and  notice,  53 
pattern  record  cards,  130 
purchase  orders,  51,  52 
Finances, 

scheduling  requirements,  159-161 
Financier, 
balance  sheet  as  viewed  by,  30- 
32 
Finished  stores  (See  "Stores,  fin- 
ished") 
Fixtures     (See    "Furniture    and 
equipment,"    "Tools   and   fix- 
tures") 
Follow-up  (See  "Tickler") 
Foremen, 
wages  of, 
overhead  distribution,  228 
Foundry, 
costing  on, 
"per  pattern"  basis,  9 
"per  pound"  basis,  9 
Freight  and  express, 
bills,  approval  of,  55,  56 


1 


472 


INDEX 


■I 


Freight  and  Express — continued 

commercial, 

cash  receipts,  entry,  250 
expense  distribution  sheet,  260 

overhead  distribution,  232 
Fuels  and  lubricants, 

overhead  distribution,  230 
Furniture  and  equipment,  office, 

controlling  account,  291 

depreciation  on,  65 


Gages, 
depreciation  on,  65 
standardization  of,  116 
General  stores  (See  "Stores,  gen- 
eral") 
Goods  returned, 
accounting  for,  111,  112 
memorandum,  110,  111 
Forms,  369 


Improvements       (See       "Better- 
ments") 
Incoming  cash  sheet,  250 

Forms,  436 
Index, 
dies,  jigs,  fixtures,  gages,  116 
drawings  and  tracings,  128,  129 
purchase  orders,  52,  53 

Forms,  355 
stores  record,  77,  80-86 
Indirect  labor   (See  "Labor,  non- 
productive") 
Industrial   accounting    (See   "Ac- 
counting, industrial") 
Industrial  engineering   (See  "En- 
gineering, industrial") 
Industrial    manager    (See   "Man- 
ager, industrial") 
Industrials, 
balance  sheet  as  viewed  by  manu- 
facturer, 36-38 


failure  of,  causes,  4,  5,  7 
loans  to,  ratio  to  assets,  4 
organization,   divisions  of,  221, 

222 
standards  lacking,  effect  of,  4 

Inspector's  punch, 
production  ticket,  176,  177 

Instruction  card, 
production  ticket,  175 
Forms,  396-398 

Insurance, 

expense,  advanced,  277 

monthly,  overhead  distribution, 
231 

stock,  expense  (commercial)  dis- 
tribution sheet,  261 

Interest, 

accrued,  general, 
controlling  account,  303 

accrued  on  bonds, 
controlling  account,  304 

paid,  expense  (commercial)  dis- 
tribution sheet,  261 

received,  expense  (commercial) 
credit,  264 
Introduction  card,  new  employee, 
201 

Forms,  412 
Inventory,  317-333 

accounts,  282-286 

classification  of  assets,  327 

drawings  and  tracings,  128,  129 

equipment  record,  332,  333 
Forms,  447 

formal  announcement,  321 

organization  required,  319 

perpetual,  factor  in  stores  sys- 
tem operation,  167 

pricing  of,  329,  330 

specifications,  321-326 

tag,  321,  322,  330-332 
Forms,  446 

work  in  progress,  329 


INDEX 


473 


InTCfitment, 
accounting,  f  rindple  same  in  all 

industrials,  6 
accounts,  286 
reserves   for   depreciation,   286, 

287 
Invoices,  purchase, 
duplicate  copies  of, 

when  necessary,  53,  54 
method  of  handling,  53-56 
receipts,  checking  of,  50 


Jigs, 
depreciation  on,  65 
standardization  of,  116 

Journal, 
register,  256,  257 

Forms,  440 
voucher,  256,  257 
Forms,  441 


Key  card, 
die,  139 
filing  of,  126 
fixture  and  die,  139 

Forms,  380 
operation,  146,  147 

Forms,  385 
part,  104,  120.  124.  125 

Forms,  373 
piece,  104,  120,  122-124 

Forms,  372 
preparation  and  care  of,  126 
production  data  shown  on,  127 
tool,  137,  138 

Forms,  379 
tool  set-up, 

Forms,  379 
unit,  104,  120,  125 

Forms,  374 


Labor   (Sec  also  "Costs,"  "Pay- 
rolls," "Employees") 
account,  280,  281 
capacity,  117 
check  upon  cost,  160 
costs, 

distribution,  214,  216 

variation  in,  check  upon,  160, 
161 
day-work  (See  "Day-work") 
distribution  sheets,  209 

Forms,  423 
element  of  production  cost,  6 
employee's  change  in  rate  card, 

203 

Forms,  412 
employee's  rate  card,  201,  202 

Forms,  411 
employment, 

application  for,  199,  200 
Forms,  406-408 

introduction  card,  201 
Forms,  412 
general    expense    (commercial) 

distribution  sheet,  259 
non-productive,  159,  180,  181 

overhead  distribution,  227,  22H 
Forms,  423 

time  sheet  record,  212 
Forms,  417 

time  ticket  (daily),  180,  212 
Forms,  403 
payment  of, 

day  work,  173 

period,  206 

piece  work,  173 

premium  method,  173 
piece-work  (See  "Piece-work") 
premium  work  (See  "Premium 

method") 
productive,  158,  159 
reference  inquiry  letters,  200 

Forms,  409 


474 


INDEX 


INDEX 


475 


Labor — continued 
requisition  for  help,  201 

Forms,  410 
scheduling,  158,  159 
selling      expense      distribution 

sheet,  262 
stability  of, 
eflSciency  development  affected 

by,  22 
employees'    resignations    and 

dismissals,  204-206 
motion  study  dependent  upon, 
146 
standardization  of,  18,  19 
time  sheets,  209-217 

Forms,  417,  418 
time  tickets  and  slips  (See  "Time 

tickets,"  "Time  slips") 
timing  of,  176-179,  180,  181 
"turnover,"  defined,  18 
waiting  time,  177,  212 
Ledger, 
general,  257,  258 
stores  (Sec  "Stores  record") 
Legal  expense   (Sec  "Expense, 

legal") 
Liabilities, 
accounts,  controlling,  270 
capital,  bonds,  and  mortgages, 

271 
current,  271 
reserves,  271 
Loans, 
industrials'  borrowing  capac- 
ity, 4 
.merchants'  borrowing  capac- 
ity. 4 
Location  card,  patterns,  131 

Forms,  376 
Loss  (See  "Profit  and  loss") 


Machines,     (See    also    "Equip- 
ment") 


analysis  of  operations, 
standardization  through,  19, 
20 
and  tools, 

controlling  account,  291, 292 
capacity,  balance  of,  117 
depreciation  on,  65 
numbering  of,  135,  136 
study  card,  135,  136 

Forms,  378 
tabulating, 
"Hollerith,"  339 
"Powers,"  339 
tool  equipment, 
analyzing  and  grouping  of, 
133-148 
Management     (See    "Scientific 

management") 
Manager, 
employment,  199 
industrial, 
balance  sheet  (monthly)  of, 
25-40 

Forms,  342-347 
duties  of,  27,  28 
report  (daily)  for,  30,  39,  40 
Forms,  348,  349 
Manufacture,  continuous, 

defined,  68,  69 
Manufacturers    (See   "Industri- 
als") 
Manufacturing    (See    "Produc- 
tion") 
Material  (See  also  "Stores") 
censorship  of,  73,  74 
classification  of,  80-86,  449 
depreciation  by  obsolescence, 

6 
element  of  production  cost,  6 
factory,  classification  of,  80-83 
manufacturing  supplies,  82,  83 
obsolete,  controlling  account, 

306,  307 
office,  classification  of,  80,  81 


Material— con^tnutfd 
operating  supplies,  81,  82 
receipt  and  notice,  49, 157 
Forms,  354 
distribution  of  copies,  49 
filing  of,  53 
requisitions  for,  86-88,  172,  173 

Forms,  359 
routing  of,  192-193 
standardization  of,  115 
stores,  general  (See  "Stores") 
Merchandise, 
returns  of,  110,  111,  112 
standards  of  operating,  4 
Merchants, 

loans  to,  ratio  to  assets,  4 
Models,  62 

standardization  of,  115 
Mortgages,  controlling  account, 

308,  309 
Motion  study  (See  also  "Time 
study") 
labor   stability   factor   in  use 

of,  146 
record  card,  144-146 

Forms,  382 
schedule,  144 

Forms,  383,  384 
time  allowance,  145 

N 

Non-productive  labor  (See  "Labor, 
non-productive"  ) 

Notes  payable, 
cash  disbursed,  entry,  253 
cash  receipts,  entry,  251,  252 
controlling  account,  302 

Notes  receivable, 
asset  account,  276,  277 
cash  receipts,  entry,  251 

Numbering,  method  of, 
pieces,  parts,  and  units,  120,  121 


Obsolescence, 
depreciation  due  to,  6 
parts  or  pieces,  155 
repaired  value  offset  by,  234 
Office, 
appliances, 
systematizer,  work  of,  339, 
340 
material,  classification  of,  80,  81 
Operation, 
described  not  symbolized,  138 
key  card,  146,  147 

Forms,  385 
method  of,  variation  in,  143, 

144 
studies,  139,  140 
study  card,  140-144 
Forms,  381 
Operations, 
rotation  of,  116,  120 

advantages  of,  142,  143 
standardization  of,  116 
tabulation  of,  116 
time  studies  covering,  116 
Orders, 
betterment,  64,  168,  182,  183 

Forms,  393 
central  station,  188-190 
classification  of,  59,  167 
contract  or  sales,  defined,  60 
control  board,  175,  190 
Forms  (insert),  404 
control  chart,  188,  189 
Forms  (insert),  404 
manufacturing,  60,  61,  62,  152, 
153,  169-170 
Forms,  388 
production,  169-170 
Forms,  392 
assembly   (See  "Orders,  pro- 
duction, assembly,  below) 
classes  of,  62 
defined,  61,  168 


476 


INDEX 


Orders — conimued 
production — continued 
distribution  of,  170 
distribution,     depsirtmental, 

105,  106 
material  distribution,  104 

Forms,  367 
numbering  of,  169 
origin  of,  61 
processing,  defined,  62 
prorating,  63,  64 
record,  233-235 

Forms,  427 
stores,  defined,  63 
production,  assembly,  62 
distribution  covering,  106 
extensions    on    distribution 

sheets,  107,  108 
material  distribution,  106 

Forms,  368 
prorating,  179,  180 
defined,  168,  169 
time  tickets  (daily). 

Forms,  402 
purchase,  47 

Forms,  353 
cancellation  of,  55 
contractural  features  of,  47 

48 
distribution  of  copies,  47,  48 
filing  of,  51,  52 
index,  52,  53 

Forms,  355 
schedule,  156-157 

Forms,  389 
spoilage,    excess    to    cover, 

157 
tickler,  48,  49 

Forms,  354 
record  of  production,  better- 
ment and  repair,  233 

Forms,  427 
repair,  66,  168.  184,  234 

Forms,  394 


stores  clerk,  67,  d8, 101 
Forms,  369 
Organization,  221-224 
chart,  223 

Forms,  422 
commercial,  222 
defined,  221,  222 
functions,      classification      of, 

221-223 
production, '222,  223 
Overhead    (See    also    "Costs," 
"Expense") 
analysis,  264 
classes  of,  232,  233 
controlling  account,  312,  313 
distribution  of,  224-233 
Forms,  423-426 
classification    (Dewey   deci- 
mal system),  225 
common    percentage    not 

equitable,  8 
costs,  non-productive  labor, 

159 
departmental    method    nec- 
essary, 7,  8 
error  in,  8 
expense,  230-232 
factory,  controlling  account 

as  medium,  7 
labor,  227,  228 
materials,  228 
purpose  of,  225,  226 
redistribution,  232 
standing  order  method  ob- 
solete, 226 
foundry, 

"per  pattern"  basis,  9 
"per  pound"  basis,  9 
manufacturing     order     to     re- 
cord, 60,  61 
non-productive  department  as 

origin,  232,  233 
productive  department  as  ori- 
gin, 232 


IND&X 


477 


Orerhead — c^ntinned 

prorated,  233 

redistribution  of,  232,  233 

unclassified, 
distribution  of,  232 
Overtime,  time  sheets, 

recording  of,  211,  212 


Parts, 
"common  to  all"  practice,  118 

manufacturing  plan,  154, 155 
defined,  62,  122 
finished  or  semi-finished, 

purchase  of,  117,  118 
key  card,  104,  120.  124,  125-127 

Forms,  373 
special,  cost  of  scrapping,  119 
standardization  of,  115 
Patents, 
controlling  account,  297,  298 
depreciation,  65 

reserve  for,  305,  306 
expenses,  260 
Patterns, 
asset,  129 

exceptions,  129 
controlling  account,  296,  297 
depreciation,  65 
location  cards,  131 

Forms,  376 
record  card,  129-131 
Forms,  376 
Pay  check, 
and   time    or   clock   card,    208, 
217 
Forms,  416,  419 
Payable,  accounts  (See  "Accounts 

payable") 
Payable,  notes  (See  "Notes  pay- 
able") 
Pay-rolls  (See  also  "Labor") 
clock  or  time  cards,  208,  217 
Forms,  416,  419 


day-rate  method, 
piece-work   adjustment   ay- 
plied  to,  215,  216 
employees'  receipt,  208 
"four-times-a-month"       system, 

206-207 
graphic  charts  of, 

check  on  labor,  160 
method  of  making  up,  207 
time  sheets,  209-218 
Forms,  417,  418 
Petty  cash,  254-256,  272,  273 
disbursement  sheet,  254 

Forms,  439 
voucher,  254 
Forms,  438 
Pieces, 
defined,  62,  122 
key  cards.  104,  120,  122-124 

Forms,  372 
standardization  of,  115 
tabulation  of,  116 
Piece-work, 

clock  cards,  207,  217 

Forms,  416,  419 
earning  capacity,  148 
scientific  management  applied 

to,  20,  21 
time  sheet  record,  213,  215, 216 

Forms,  417,  418 
time  tickets  and  slips,  173 
Forms,  397,  399 
Planning, 
board,  193-195 

Forms  (insert),  404 
central  station,  167 
system,  188,  189,  190 
Plant, 
betterments,  181-183 

Forms,  393,  401 
capacity, 
labor     schedule    based    on 

analysis,  158 
utilizing,  116-119 


II 


478 


INDEX 


i 

I 
a 


Plant — continued 
repairs,  181,  183-186 
Forms,  394,  402 
Postage, 
expense  (selling)  distribution, 
263 
Power  and  light  equipment, 

controlling  account,  292,  293 
Power  plant,  depreciation  on,  65 
Premium  method  of  paying  em- 
ployees, 
clock  cards,  207,  217 

Forms,  416,  419 
earning  capacity,  148 
time  sheet  record,  213,  215 

Forms,  417,  418 
time  tickets  and  slips,  173 
Forms,  398,  400 
Price,  stores  record,  78,  79 
Processing, 
factors, 
expense,  labor  and  material, 
38 
production  order,  62 
Product    (See    also    "Produc- 
tion") 
finished, 
controlling    account    for 

each,  310,  311 
labor,  material  and  expense 
converted  into,  165-195 
unfinished    (See  "Stores,   com- 
ponent") 
Production    (See   also   "Costs," 
"Operation") 
assembly  production  order,  ma- 
terial distribution,  106-108 
Forms,  308 
costs,    186,    187    (See    also 
"Costs,  production") 
card,  236-238 

Forms,  428,  429 
reduced  by  unified  output, 
12 


reduced  by  volume  output, 
14 

stabilizing    by    depreciation 

charge  to  liabilities,  234 
variety  of  items  increases,  10. 
department, 
cost,  158,  159 
key  card,  use  of,  127 
elements  of,  6,  226,  227 
factors  of, 
expense,  labor  and  material, 
38 
handling  of,  113-131 

analysis  of,  115,  116 
haphazard,  results  due  to,  23 
ledger,  233-236 

orders,      169-170      (See      also 
"Orders,  production") 
Forms,  392 
defined,  168 
distribution  of  material,  104 

Forms,  367 
record,  233,  234,  235 
Forms,  427 
pace-making  department,   117 
parts  balance  schedule  basis, 

116 
preparation  for  handling,  113- 

131 
rate-setting,  117 
record  clerk,  duties  of,  104 
sales  policy  controlling,  118 
schedule,  119,  120,  153-156 

Forms,  389 
standardized  output,  15,  16 
terminology  used,  62 
time    slip    (daily),    day-work, 
173 
Forms,  399 
time  slip  (daily),  piece-work, 
173 
Forms,  399 
time  slip  (daily),  premium,  173 
Forms,  400 


INDEX 


479 


Production — continued 
time  tickets,  173-177 
Forms,  396-398 
day-work,  173 
Forms,  396 
distribution  of,  175 
numbering  of,  174 
piece-work,  173 

Forms,  397 
premium,  173 
Forms,  398 
unified   output,   cost   reduced 
by,  12,  13 
Profit  and  Loss, 
accounts,  controlling,  270 
general,  controlling    account, 

314,  315 
monthly,  controlling  account, 
314 
Prorating  orders,  63,  64,  168,  169, 
179.  180 
time  tickets,  180 
Forms,  402 
Purchasing 
and  receiving,  41-56 
department, 
key  cards,  use  of,  127 
work  of,  43 
orders,    47    (See    also    Orders, 
purchase") 
Forms,  353 
requisitions,  44 

Forms,  352 
specifications     covering     ma- 
terial, 43 
voucher  system,  243-249 
Forms,  432 


Railroads, 
depreciation  on,  65 
equipment,  depreciation,  65 

Rate 
compensation,  basis  of,  117 


memo,  147,  148 
Forms,  386 
Real  estate, 
controlling  account,  288 
depreciation   not   written   off, 

64 

Rebates  and  allowances, 
expense  (selling)  distribution, 
262 
Receipt  and  notice,  material,  49, 
53 
Forms,  354 
Receivable,  accounts  (Sec  "Ac- 
counts receivable") 
Receivable,   notes   (Sec  "Notes 

receivable") 
Record, 
check,  252 

Forms,  437 
drawing  and  tracing,  128,  129 

Forms,  375 
equipment,  332 

Forms,  446 
machine  study  card,  135-137 

Forms,  378 
motion  study,  144-146 

Forms,  382 
patterns,  129-131 

Forms,  376 
petty  cash  disbursements,  254 

Forms,  439 
price,  perpetual,  purchasing  de- 
partment, 49 
production,     betterment    and 
repair  orders,  233 
Forms,  427 
stores,  component,  95,  97 

Forms,  362 
stores,  finished,  99 

Forms,  363 
stores,  general,  75-80 

Forms,  358 
voucher,  248 
Forms,  435 


48o 


INDEX 


INDEX 


481 


I 


Record — continued 
waiting  time  (daily),  178 
Forms,  401 
Recorder,  stores,  72,  73 
Reference  inquiry  letter  200 

Forms,  409 
Register,  journal,  256,  257 

Forms,  440 
Rejections, 
defective  repairs,  188 

Forms,  404 
scrap,  rejected  for,  187,  188 
Forms,  403 
Rent, 
expense    (commercial)    distri- 
bution sheet,  261 
overhead  distribution,  231 
Repairs, 
assets,  fixed, 

depreciation  charged,  7 
defective, 
rejected  as,  188 

Forms,  404 
time  ticket  (daily),  177,  178 
Forms,  400 
merchandise  sold, 
sales    department    transac- 
tion, 111,  112 
plant,  168,  183-186 
order,  66,  168,  184 

Forms,  394 
order  record,  233 

Forms,  427 
reserves  chargeable  with,  66 
time  ticket  (daily),  185 
Forms,  402 
Report, 
general  manager's  daily,  39,  40 

Forms,  348,  349 
verbal  information  unreliable,  27 
Request  tickets,  material,  73,  74 
Requisitions, 
assembly,  103,  104 
Forms,  365 


component  store,  97,  99 
for  help,  201 
Forms,  410 
general  stores,  86-89 
Forms,  359 
routing   tag  to  accompany, 
88 
purchase,  44-47 
Forms,  352 
shop  stores. 

Forms,  360 
storekeeper's,  109 
Forms,  369 
Reservations,  stores,  69 
Reserves, 
bad  accounts, 

controlling  account,  306 
commercial  expense  distribution 

sheet,  261 
controlling  accounts,  304-306 
depreciation,  184 
of  buildings,  controlling  ac- 
counts, 305 
of   patents,    controlling   ac- 
count, 305 
investment,  286,  287 
repairs,  chargeable  to,  66 
Revenues,  total, 

controlling  account,  310 
Routing  desk,  routine  of,  190-193 
Royalties, 
expense     (commercial)     distri- 
bution sheet,  260 

8 

Salaries, 
expense    (commercial)   distri- 
bution sheet,  259 
Sales, 
analysis  sheet,  239 

Forms,  430 
cost   of,    controlli«g   tcc«u«t, 
311 


Sales — continued 
department, 
costs  affected  by  policy  of, 

11 
function  of,  11,  12 
goods  returned,  handling  of, 
110-112 
expense      percentages     based 

upon,  258 
orders,  60 

records,  factor  in  determining 
production,  23 
Salesmen,  advance  expense,  278 
Schedules,  149-164 
department,  use  of  key  card, 

127 
importance  of,  161 
labor,  158,  159 
master,  152,  159 

Forms,  388 
motion  study,  144 
Forms,  383,  384 
production,  153-156 

Forms,  389 
purchase  order,  156,  157 

Forms,  389 
purpose  of,  151,  152 
sales  requirements,  116 
scope  of,  151,  152 
Scientific  management, 
results  of,  20,  21,  23 
Scrap,  rejected  for,  187,  188 

Forms,  403 
Selling  (See  also  "Sales  depart- 
ment") 
profit     affected     by     method 
used,  12 
Semi-finished     stores     (See 

"Stores,  component") 
Shipping  supplies, 

overhead  distribution,  228 
Shop, 

fixtures  and  fittings. 

controlling  accotinf,  294,20? 


depreciation  on,  65 
stores,  68,  285,  286 
requisition,  Forms,  360 
Shorts,  103,  107 

elimination  of,  108 
Shows  and  demonstrations, 
expense  (selling)  distribution, 
262 
Solvency, 
financier's   viewpoint   of   bal- 
ance sheet,  31 
Standardization, 

advantages  gained  by,  118 
Stock  (See  "Capital  stock") 
Stores  (See  also  "Material,"  also 
"Stores,  general,"  below) 
balance,  daily  report,  108 
classes  of,  68 
component,  91-99 
controlling  account,  98,  99,  284 
costing  out,  94 
defined,  68,  93,  94,  95 
items  excluded  from,  93 
record,  95-97 
Forms,  362 
requisitions  for,  97,  98 
"work  in  progress,"  method  of 
handling,  93 
finished, 
controlling  account,  284,  285 
defined,  68 

items  excluded  from,  93 
record,  99 

Forms,  363 
"work  in  progress,"  method  of 
handling,  93 
general   (See  "Stores,  general," 

below) 
receipts  in,  parts  or  pieces  fin- 
ished, 96 
requirements  as  to,  68,  69 
requisition,  assembly,  103,  104 

Forms,  365 
reservation  of,  69 


482 


INDEX 


Stores — continued 
shop,  68,  285,  286 
requisition,  Forms,  360 
Stores,  general,  57-90   (See  also 
''Stores,"  above) 
classification,  80,  83-86 

Forms,  449 
control  of,  74,  75 
controlling  account,  282 
defined,  68 

department  floor  plan,  76,  88 
distribution,  classification,  80 
inventory    should     not    exceed 

sixty  days  requirements,  34 
keeper  (See  "Stores  keeper,"  be- 
low) 
ledger  (See  "Stores  record,"  be- 
low) 
location  chart,  76,  88 
material  returned  to,  89,  90 

Forms,  359 
office  material,  80 
order,  67,  68,  109 

Forms,  369 
receipts,  49,  157 

Forms,  354 
record,  75-80 

Forms,  358.  449-466 
entries,  77-80,  157 
functions  of,  75 
indexing  of,  77,  80-86 
prices,  78,  79 
work  in  progress,  75,  76 
recorder,  requisitions,  purchase, 

45,46 
requisitions,  86-88,  172,  173 

Forms,  359 
standardization,  59 
voucher  system,  244 
Stores  keeper,  71,  72 
key  card,  use  of,  127 
order,  67,  68,  109 

Forms,  369 
responsibility  of,  43,  46 


Stores-keeping,  68-71 
objects  of,  108,  109 
routine  of,  69,  70 
Studies, 
machine,  card,  135 

Forms,  378 
motion,  144-146 

Forms,  382 
operation,  139,  140-144 
Forms,  381 
Supplementary  tag,  187 

Forms,  403 
Supplies, 
manufacturing, 

classification  of,  82,  83 
office, 
expense   (commercial)   distri- 
bution sheet,  260 
expense  (selling)  distribution, 
263 
operating 
classification  of,  81,  82 
defined,  228,  229 
overhead  distribution,  228,  229 
shipping,  228 
Surplus,  controlling  account,  309 
Symbols, 
material  and  process  identifica- 
tion, 61,  62 
use  of,  advantage,  225 
Systematizcr,  work  of,  335-340 


Tag, 
inventory,  321,  322,  330-332 

Forms,  446 
machine,   193,   194 
rejected   for   defective   repairs, 

188 

Forms,  404 
rejected  for  scrap,  187,  188 

Forms,  403 


INDEX 


483 


Tag — continued 
routing,  requisitions  for  produc- 
tion material  to  have,  88 
supplementary,  187 

Forms,  403 
tracing.  170-172 
Forms,  395 
use  of,  work  in  progress,  96 
workman's,  194 
Taxes, 
accrued,  controlling  account,  303 
corporation, 
expense    (commercial)   distri- 
bution sheet,  260 
overhead  distribution,  231,  232 
Telegraph  and  telephone, 
expense   (commercial)  distribu- 
tion sheet,  260 
Tickler, 

purchase  order,  48,  49 

Forms,  354 
purchase  voucher,  246 
Forms,  433 
Time, 
card  (clock  card).  207,  217 
Forms,  416,  419 
checking  against,  212 
sorting  of,  216 
keeper,  duties  of,  207 
lost  (See  "Waiting  time") 
sheet,  209-218 

Forms,  417,  418 
departmental  and  order  distri- 
bution, 216 
use  of,  209,  210 
slip,  173 
day-work,  173 
Forms,  399 
piece-work.  173 

Forms,  399 
premium  work,  173 
Forms.  4(X) 
studies,  operations  to  be  covered 
by,  116 


ticket, 
defective  repairs,  177 

Forms,  400 
distribution  of,  216 
non-productive  labor,  180 

Forms,  403 
plant  betterments,  183 

Forms,  401 
plant  repairs,  185 

Forms.  402 
production.  173 

Forms.  396-398 
prorating  order,  180 

Forms,  402 
waiting  time,  178.  212 
Forms,  401 
Tools, 
and  fixtures, 
shop,  depreciation  on.  65 
standardization  of,   116 
care  of,  137 

data  for  operation  key  card,  147 
depreciation  on.  65 
key  card.  137,  138 

Forms,  379 
set  up  key  card,  138,  139 

Forms.  379 
small  and  hand, 

classification  of.  82 
symbols  assigned  to.  137 
Tracings     (See    "Drawings     and 
tracings") 
tag.  170-172 
Forms,  395 
Transportation  charges.  55,  56 
Traveling, 
expense    (selling)    distribution, 
262 
Treasury, 
bonds,  279 
stock,  279,  280 
Trucking, 

overhead,  distribution,  228 
Turnover,  labor,  18 


484 


INDEX 


U 

Unfinished    stores    (Cee    "Stores, 

component") 
Unified  balance  sheet   (See  "Bal- 
ance sheet") 
Unit, 
defined,  62,  121,  122 
key  cards,  104,  120,  135 

Forms,  374 
secondary,  defined,  122 
standardization  of,  115 


Voucher, 
cash,  petty,  254 

Forms,  438 
charge,  247,  248 

Forms,  434 
claim,  54 

Forms,  355 
journal,  257 

Forms,  441 
purchase,  243,  245-247 
Forms,  432 

charge  voucher  deducted,  247 

tickler  card,  246 
Forms,  433 

impaid  file,  246 
record,  243,  244,  248,  249 

Forms,  435 
system, 

general  stores  under  the,  244 


void,  disposition  of,  255,  257 

W 

Wages, 
day  rata  to  be  set,  202 
department,  change  of,  203 

Forms,  413 
employees  rate  card,  201,  202 

Forms,  411 
piece  rates,  202 

reduction  of,  202 
premium  earnings, 

method  of  handling,  208 
rate,  change  of,  202,  203 

Forms,  412 
Waiting  time, 
ticket,  daily,  178 

Forms,  401 
time  sheet  record,  212 
Work  in  progress, 

betterments,   treatment   of,    182, 

183 
controlling  account,  282-284 
inventory,  329 
stores, 

as  medium  of  handling,  69-71 

component,    relation   between, 
93 

finished,  relation  between,  93, 
94,  95 
general  stores  record,  75,  76 


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